Care to describe what you mean by “exploitation of LPs” ?
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If we are going to use KNC token printing to subsidize LP’,s there MUST be a fee from the very beginning of DMM. And it should be calculated in order for the individual KNC loyal investor to break even, to not lose value due to monetary emission and dilution of KyberDAO rewards.
I don’t believe that, to achieve adoption we need to bootstrap it from a losing value position, we can bootstrap adoption from a break even position and even from a profiting position. It is unthinkable to tell investors that their investments must be sacrificed in the name of a “greater purpose”, it just can’t and shouldn’t happen.
Is not an incentivization, is a SUBSIDIZATION. Stop calling things wrongly. IS basically a TAX to KNC hodlers that the majority is imposing to the individual KNC hodler to fund whatever the majority wants. We should just use it objectively in order to compete, we should not abuse from it.
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Long term KNC hodler here since 2017 and a strong supporter of the project since. I absolutely loved that Kyber rollercoaster ride so far - and KNC also used to be my biggest bag - until the other coins passed it in value… I have read the complete discussion here and I am grateful for all the insights. Usually I am a silent reader - but the discussion here caused me to create an account and post my opinion.
I agree with @tezoswakeanbake and all others that the long term holders definetly(!) need some sort of compensation for the inflation that is going to happen. I think a fee on the DMM - that then goes to the DAO stakers is the only solution here. To be honest, I am actually quite surprised that this has not been implemented from the start of the DMM.
I am not yet willing to jump ship - but if my current staking in the KyberDAO will not soon again yield a nice return - I may consider switching to another coin that provides a better yield. For now I am still waiting for whats going to happen - but my kyber “diamond hands” are melting given the very small rewards. An APY of 5-10% is what I would need to maintain my stake.
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Just found out about this on telegram! Pretty big news. long time holder here. looking at the comments seems like most people are supportive of the need for an ecosystem fund and liquidity mining but most are worried about what it means for existing knc holders. An increase of 42m KNC sounds too high at first but looking at the interest% in the farming pools required to attract lps i think it is necessary. just take a look at Sushi anything less than 25-40% apy for the pool is not gonna be attractive at all. it’s a very competitive.
I’m against having 0 fees collected for the dao. I feel the dao should receive fees from the Dmm since knc holders are in a way contributing the incentives to lps and should share in the success of the Dmm. BUT i’m alright having these fees very very low at the start since token rates needs to be very competitive to get volume.
Even with more tokens added, if fees are too high the eventual rates might end up worse than competitors, defeating the purpose of increasing tvl to get better liquidity. doesn’t make sense if volume will be low and knc holders suffer from trying to charge fees. This doesn’t make sense at all.
Best case scenario is high apy for liquidity mining, high tvl and liquidity, low trading rates to get volume, low fees sent to the Dao and knc holders at the start, but fees to increase as adoption grows. gd luck kyber team! look forward to the actual kip and to start adding liquidity
Kyber needs to compete against Uniswap v3 which has similar mechanism to DMM and we already have many options to be LP.
So I don’t think many people will provide liquidity for DMM without incentives. Now DMM doesn’t have many pairs beating Uniswap v2 pair even we have amp.
It seems minting KNC more is inevitable for KNC growth. Once Kyber has decent amount of TVL, people will start to consider DMM as one option for providing liquidity. It will contribute to increase KNC value.
I agree with most parts of the proposals with the following exceptions:
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From the start, DMM has to be part of the Kyber Network and a percentage of the fees has to go to the KyberDOA stakers. This will encourage more community members to stake and vote. If no rewards are received from the DMM, there is absolutely no reason to stake or vote.
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I think that any campaign pool that has KNC as one of the pairs (ex. KNC-ETH) should have higher rewards than the rest of the pools. Doing that will incentivize more LPs to provide liquidity for KNC.
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Speaking as a long term KNC holder, I think this proposal has merit. Ultimately as KNC holders we want the value to rise, and Loi’s proposal provides a transparent outline on their intentions for future growth.
Right now, the goal is to attract liquidity providers to help stabilize the market and decrease slippage. So rather simply than holding on the KNC tokens, it would be a better benefit if they can be incentivized to deposit tokens, hence the KNC Reward Emission.
I’m not a big fan of the idea of generating more KNC but Kyber seems to have taken precautions to manage its utility by proposing to generate a fixed amount and burning any remainder at the end of a certain time period. Naturally rewards have to come from somewhere, so as long as Kyber keeps its word I don’t see a problem.
However, not charging a fee that should go to KyberDAO yet providing incentives to liquidity providers feels unfair to us KNC holders. Instead of trading, we hold them because we believe in Kyber and want to have a say in its procedures and growth, yet now it feels like we’re expected to give something for nothing. This doesn’t make sense.
Is there a way current KNC holders and liquidity providers can share the rewards?
As always, I appreciate how active the Kyber team has been in collecting feedback from the community. I’m sure they will take our concerns to heart and use their expertise to make the best decision for everyone involved.
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I think the discussion is converging to two main points.
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Most people agree to create incentive to attract more TVL to grow DMM. The who space is getting more competitive with new incentive everywhere (Sushi, Uniswap, 1inch, etc), so DMM definitely needs additional incentive to attract more LPs.
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We need to have a way to translate the DMM growth to the growth of KyberDAO revenue too, which will potentially result into higher reward for KyberDAO voters, hence incentivizing more KNCs to be locked up and more participation in KyberDAO.
Regarding the second point, I think one simple way to do that is to allow DMM to contribute fee to KyberDAO in every trade. For example, a portion of the LP fee will be collected and sent to the treasury of the DAO. How much of the fee will be collected is up to the discussion.
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Regarding the second point, about how much. It must be enough to cover what the individual KNC hodler is losing through dilution of value by LP’s selling pressure and through Kyber DAO ETH rewards dilution. IF the KNC hodler is losing more value due to monetary emission than what he’s been given from DMM fees, then he is been sacrificed.
I played with the number to check the estimated LM APR on DMM. Calculated the results in the two different KNC token prices (one bearish/one bullish).
[CASE ONE]
Minting 20% total supply * 60% Ecosystem fund for LM rewards
Note: $1B the target DMM TVL (USD) is for the 5 eligible pools, not the total TVL of DMM
[CASE TWO]
Mint 20% total supply * 80% Ecosystem fund for LM rewards
Note: $1B the target DMM TVL (USD) is for the 5 eligible pools, not the total TVL of DMM
Estimated APR is not that attractive compared to other LM programs but this is the one whole year LM program, not a few weeks/month ones and this will attract long-term holders who want to deposit their assets to earn passive interests and feel safe/comfortable abt it. ( not like you need to check Twitter everyday worrying about hack or rugpull)
If we can give out more rewards to the early adopters, competitive APR in the first few months will attract those big ETH whales to join. I will deposit some of my ETH-WBTC in DMM if the APR can be stable like my chart show and the program runs for a year.
The team def has to consider giving out higher APR in the early stage to get the attention and this is the % I suggesting. The number can be changed but the intention here is that giving out the higher % of rewards in the early stage.
The chart below is my suggestion of how much we should give out for each pool. Based on Kyber3.0 blog post, stable pair pool is the best showcase of the high capital efficiency possible on Kyber DMM so I would give out higher rewards to USDT-USDC pool to attract more TVL so DMM can provide a better rate than others. The second highest reward goes to the KNC pool. From minting 20% of the total supply, KNC holders are taking a risk of value dilution so there should be higher incentive/compensation for KNC holders.
I personally think Case Two (use 80% of ecosystem fund for LM program) would be the better option to bring life to DMM. If we can pull out the market adoption through this incentive program, the growth for the next protocols wouldn’t cost this high since Kyber will already have sizable users/integrate projects.
Use the remained 10% out of 20% eco fund to collaborate with other projects for different token pools yield farming and leave the 10% as an emergency fund…if we don’t use it in a year, burn it.
Didn’t do much research on the rewards emission but the newly minted KNC shouldn’t be released to the market so soon, I prefer to have around 6month+ linear distribution mechanism.
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Hello everyone, been a while since I posted in the previous thread when we were discussing whether or not the token upgrade would go through. I had fun reading through some of the posts on this thread as some of them did get pretty weird.
Since the token upgrade did go through I’d like to share some quick ideas I have to try and make sure inflation doesn’t get out of hand, lp’s are incentivized to offer liquidity to Kyber and that the Kyber Network and knc token continue to grow in value. Some of these or similar ideas may have already been suggested before and I might have missed reading them so apologies if that is the case.
Firstly as gas fees are very high ( over 200 gwei at the time of me posting this) I think it is important to realize that the token upgrade vote was passed through with a minority of knc token holders voting on it when compared to the 100k plus actual knc holders ( based on addresses with knc in it) as trying to vote and stake is very expensive for most token holders right now. Of course these voting stakers have the most invested in knc right now which does count for something but many of them may end up becoming lp’s themselves so will get a share of the knc inflation and are voting in their own interest. The majority of knc holders won’t so I think it’s important to also try and incentivize the number of knc holders to remain high given all the mentions of community the devs talk about and so that the network remains decentralized in its governance and control doesn’t just concentrate in a few hands.
Secondly, the inflation needs to be limited to 20%. If there is another vote on increasing the supply it needs to be after a lot more knc holders are actually on board staking knc so the vote isn’t just passed by a small number of addresses again. This is only going to happen when gas fees go down a lot so that staking rewards are actually profitable and this will probably only happen after the eth 2.0 upgrade is complete. The team should also look into l2 solutions as they have mentioned to aid this.
Thirdly, I think any further increases in token supply (or decreases) should be inline with the growth of the Kyber Network. Having a two token model might not be bad, the second token can be backed by eth and knc tokens held in the dao treasury which is accumulated/purchased with network fees. This difference in tokens can be thought of as the difference between preferred and common stock in a corporation.
Original knc holders get voting rights on the dao and the reward fees associated with holding the token. Lp’s get their portion of transaction fees as well as reward fees from the knc held in the treasury. The lp token may also be allowed to vote on some issues but any decisions to increase the knc supply more or release the knc held in the treasury is controlled only by knc holders. You could also have a set up where the knc token is worth more votes than the lp token such as a 2:1 voting power depending on what is being voted on.
You could also with dao approval let the lp token be converted to knc but after a time limit of say a year or so instead of just handing knc to lp’s automatically. In order to be eligable for a token conversion they have to provide liquidity continuously for the time period, this will actually incentivize them to stick around and be good liquidity providers.
You can do some of these things even without a token split. In order to mint more knc to give to lps (with a vote of course) there has to be an equivalent or at least partial amount of eth in the dao treasury. This controls inflation and depreciating the value as the knc is at least somewhat backed by eth. Knc stakers could also be offered to purchase some of this new knc at a slight discount with the eth being added to the treasury.
Having to vote every epoch to get reward fees has turned out to be flawed in my opinion as high gas fees is limiting participation. Most of the epoch votes have just centered on reward distributions anway which don’t vary all that much. If a knc staker does see something he feels like he really wants to vote on then they will but it shouldn’t be a necessity for accruing staking rewards. If he doesn’t vote on a particular issue then it should just be seen as them not being interested in that particular voting issue and not being used to penalize their staking rewards.
Also having eth from staking rewards just sitting in the treasury untill the knc stakers decide to withdraw it is pretty unproductive. There should be votes to put portions of this eth to work doing things to add value. Some of it could be used to buy back newly minted knc tokens give to the lps and support the token price. The knc stakers can then withdraw some of this repurchased knc as a reward if they want or let it accure. Since ethereum is moving to a staking model I also think there should be votes on if some of the eth collected from fees should be staked with node validators. There are a variety of decentralized and centralized staking options available now and in the future. This would accure more eth which can then be paid to knc holders as a dividend, restaked, used to mint more knc, you get the idea. If liquidity providers do have their own token they can also have a vote on whether they want their portion of network fees paid out in eth or staked as well. Again, you can have a two token model or do away with it based on preference and still do these things.
This should hopefully increase the value of knc over time as it becomes an asset with eth or other “hard” tokens backing it up. Given that eth might have a deflationary supply with the eip 1599 update burning a portion of eth I think the dao should try to maxmize the amount of eth in the dao treasury and have it back the knc,. Hopefully this should also keep knc token inflation under control and the token working for already existing holders. As I mentioned earlier, making knc stakers vote on every issue to accure rewards is also damaging as it just makes them waste eth which is going to become a lot more valuable in the future.
I think we should be very careful about manipulating supply - for any reason.
The concept of legitimacy comes to mind here - why does ETH outsource MEV from the native protocol? Why does ETH choose not to offer any incentives or treasuries for various purposes, even if they may be beneficial in certain metrics?
Despite the benefits that the KNC donation to LPs can have on adoption - you have to consider will the community stand behind more and more subjective matters? If you set the precedent that the KNC DAO can manipulate supply - where does it stop?
Does somebody introduce another proposal tomorrow to inflate the tokens by another 20% to payback anybody that might have lost KNC in forgotten wallets?
Do you see how this pattern of thinking can lead to devastating outcomes for the protocol?
Either there is NO inflation of the supply, for whatever reason, or there is no bounds to what can be asked from the DAO in terms of manipulating the supply.
This is very very dangerous and a pivotal moment imo. I just joined KNC and am very excited about what the future holds - but reading though this thread has gotten me very scared. I am likely going to exit my position because I cannot believe that these matters are being proposed without considering what philosophical impacts such a decision could have on the future of KNC.
@DaarioNaharis We need to subsidize LP’s, we need inflation, if we don’t subsidize LP’s, we can’t compete. It is very objective to subsidize LP’s using inflation as our competitors are doing. The only thing, is that we can’t subsidize without anything in return, DMM should start charging fees from the very beginning, To offset what KNC token holders will lose through dilution due to inflation.
That’s the only thing we were discussing, initially, Kyber Team wanted to not charge fees to “bootstrap” adoption, but that is like telling your investors, that they will be sacrificed for in the name of a “greater purpose”, it was an unacceptable, but it seems that the team already realized and acknowledge this, and now they agreed that some fees need to be charged from the very beginning, fees that will go to KyberDAO.
How many fees should be charged on DMM and KyberSwap? Enough to compensate dilution due to inflation. We should take into account, how many tokens we are printing to subsidize LP’s, and calculate a fee based on that to offset dilution AND to make at least a small profit. We just can’t be sacrificed in the name of a “greater purpose” that’s no way of treating investors, that’s the only thing, if we are treated that way, i will have to sell too.
we drafted & submitted a KIP 8 based on the discussion of everyone here, please take a look. A proposal on KyberDAO should be live shortly (in around 26 hours) for the DAO to vote on it.