KNC Token Migration & Upgrade Discussion

KyberSwap Feature Requests & Research KNC & KyberDAO
125

The inflation solution proposed is to create ARTIFICIAL conditions by subsidising LP’s, that will lead us to have more liquidity available in our platform, which might turn into more volume because the DEX is now more capable of processing bigger volumes than before, but this is always at the cost of the KNC Holders. The day we take out inflation based model to subsidize LP’s, is the day we are going to get back to where we are standing right now, because of not having the proper ideal REAL conditions. The ONLY real solution is to create these REAL conditions for LP’s and Traders to prefer to use our platform WITHOUT subsidizing them, making it easier and more cost efficient for LP’s to start providing liquidity and make it cost efficient to traders as well. IF you can’t understand my point, then here you have it again.

I agree to use inflation (or another ICO round) but only to fund development to make KyberSwap technologically superior, and by technologically superior i mean to create the REAL ideal conditions that will end up increasing cost efficiency for LPs and Traders to use the platform versus the other platforms, or to scale it, not to subsidize LPs, subsidizing LPs is NOT a technological superior feature.

Subsidizing LP’s will create dependency, the day we want to stop the subsidy (If trully can be stopped and if the tyranny of the majority will allow), they will leave to other platforms that give them free ROI at expense to their token holders like BAL token is doing it, why so desperate to be more like BAL and not just technological superior than BAL? Is just a mental jerkoff, that we truly need to subsidize LPs to remain competitive like the others platforms… IS imperative that if any inflation will be tu be minted is only to fund development to make Kyber Technologically superior, not to give subsidies, giving subsidies is by no means a competitive superior technological feature.

So no, I’m not saying inflation is necessarily bad, I’m saying subsidizing different parties that do NOT belong to technology development is bad.

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126

Hello, I’m an investor since before 2017 bubble, and I’m concerned about whats happening right now with Kyber Network regarding inflation.

I have read all the comments, and I’m more in favor on what tezoswakeandbake have said. I also think that inflation should only be used, if any, for development & technological upgrades, not to finance or as Tezoswakenbake call it “subsidise” other stuff that is not development. A “subsidy” to liquidity providers is more a short term thinking whim than a necessity, but technological upgrades are indeed justifiable and needed. At the end, if Kyber achieve the best and most efficient tech, we won’t even need to give minted tokens to liquidity providers. I’m more conservative in this matter.

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127

Hi Kyber community! It is really heartening to see such active discussion on our new governance forum! This KNC Migration is just one of many important topics and decisions we have to decide on together moving forward.

I would like to remind everyone that this particular KNC Migration proposal is meant to make the KNC token much more dynamic, flexible, and easily upgradeable to support our new Kyber 3.0 architecture.

It does not necessarily mean that there will be a change to the KNC supply. Any minting of new KNC for specific initiatives such as liquidity mining would have to be proposed and voted on by the KyberDAO again via a separate proposal. As a community, one of the key objectives for us is to ensure that KNC plays an increasingly important and valuable role in the Kyber and DeFi ecosystem.

I’d encourage everyone to focus more on the safeguards we need to prevent abuse of KNC by malicious parties, which is critical in any token model and system. For example, even for this upcoming KIP to migrate KNC, you may share your thoughts on what voting quorum is needed etc.

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128

We are supportive of the token migration and KNC minting. Although KNC holders will be diluted, new KNC can be used effectively across new growth areas.

Some ideas to consider:

  1. Specific token allocations: To offset the dilution, the newly minted KNC needs to be used effectively. Before migrating to a new token contract and beginning the minting process, there may be value in clearly outlining how the new tokens will be used through an itemized list (i.e here are the stakeholders that will be rewarded, why, and how much). Instead of having a general pool for the DAO, this gives the minting process more direction from the start and allows the DAO to mint a target number vs. something more arbitrary. This could also alleviate concerns around the token mint.

  2. One time mint vs. recurring: Recurring KNC minting events may lead to more confusion and unpredictability for token holders. However, a one time large mint allows the community to decide how the tokens will be used initially and provide KNC holders with more predictability, as less tokens will be minted in the future.

  3. Partial lockup: We have seen some DeFi protocols become “industrial farms” where LPs simply farm and dump the token. Instead, a partial lockup could be implemented in which KNC holders get 1/2 of their KNC upfront and 1/2 their KNC after some vesting period.

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129

Well, it appears that no matter what we debate, inflation will be done.

I propose a supermajority threshold of 80% to “protect” minorities. I also propose a dynamic voting weight based on past data participation, if you have a impecable voting record, your vote should be 1 KNC = 1 vote, if you don’t care and do not participate, your voting weight rapidly decays.

I don’t like the idea of voting proxies, external individuals can contact and seduce or pay directly to big voting proxies owners to approve funding for anything, this would be vote buying. They vote with KNC that is not even theirs. There is no way to check or verify this, they can even be paid in Monero, and how could we possibly know? This is serious and scammy. Voting proxies should not exist when inflation based funding is introduced. Delegators won’t even care if they continue receiving their ETH from KyberDAO, so, there is no possible way to verify if voting proxies are behaving honestly. They should not participate in inflation based funding.

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130

Great input! I wanna share some of my thoughts on your proposal.

  1. Specific token allocations:

Kyber team should create a platform similar to Gitcoin to make this allocation process smooth and trackable. (users can claim a portion of rewards/KNC when they hit each milestone, track how much left in the minted inventory, LM allocation, etc)

So the process will be like this:
Creating the proposal on the forum → KyberDAO vote on the most popular proposals → If the vote passes, the event will be updated on this website with all the detail → Portion of rewards distributes to the contributors

  1. One time mint vs. recurring:

I also thought one-time minting is def the better option (e.g. max 10% of the total supply) but thinking again, what if KNC price continues to drop or the bear market lasts for years and we need to pay a significant amount of KNC to meet the USD value to contributors? The inventory can drain much faster than we expect. In that sense, recurring KNC minting based on the market situation, speed of developments, and level of engagements could be the better option.

For the first minting amount, we can mint the exact amount of KNC that has been burned since the Mainnet. I am not sure the exact numbers or $ value but it should be enough to kick start for DMM. And technically it’s not inflating the total KNC supply that was released in 2017, so KNC holders including me will feel less worried.

  1. Partial lockup :

Not sure whether we should implement the lockup… I personally just wanna do whatever I wanna do with the tokens that I received from providing liquidity…haha I support the lockup for only those special LM rewards like Kyber partners with other projects like Ren and Synthetix team (like how Curve did for their first LM program) and give out all 3 tokens to LPs, yes lockup makes sense in this scenario, and I’d love to participate it!!

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131

When introducing the new token, could it use another underlying protocol that is interoperable with ETH but not an ETH token? It could be designed to be used for voting, staking and receiving/minting new KNC or a Wrapped Ether token as the reward. A newer protocol could provide less fees for users and stakers and improve usability. The new mainnet could record all previous transaction and continue to track and use an ERC token for ETH’s mainnet. The new token could be swappable 1 to 1 for KNC3 and the ERC version of KNC through LP’s or DAO.

This would allow users to still operate on ETH or the new KNC protocol. It would also remove the need for a layer 2 token on ETH though one can still be added. Layer 2 still would require gas fees and further inhibit KNC’s growth. The new protocol could also use a similar template like other defi tokens and be built upon to create a new economy that would drive more users to use the new KNC. App builders could be paid for each phase of the development lifecycle to ensure production.

Another reason why another protocol outside of ETH would be beneficial is you would be able to take advantage of other coins volume. If the protocol was interoperable with other coins such as XTZ, ADA, EOS you could instantly add volume once the new model is live. Wouldn’t KNC benefit from a cross protocol model like this? It could effectively add to the overall market share without even taking anything back from AAVE,UNI and Sushi. Then once volume has ramped up and users are trading and exchanging people may see the unique use for KNC and flock to it, once again adding to the total market use and further increasing volume. Such a task is not easy but if KNC were to head in this direction it could really take off and lead the DeFi space.

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132

Thanks Anjan, very solid list of key topics to discuss before the community finalises the plan. I wanted to share my personal comments here.

Every time there is a token issuance request, the DAO should vote on to decide on this. And there should be a template on the level of details (regarding whats the purpose, whats the lock up/ vesting period, etc) that each minting proposal should prepare before even bringing it up to the DAO.

As a general policy, we should have some clear rules on how many % supporting votes should a proposal have in order to pass, and ideally i think this percentage should be higher for proposals that want to issue more KNCs than others. We should also have some threshold on the number of minting proposals per epoch (or month, quarter, etc) to avoid abusing the DAO. For example, it is almost impossible for the DAO to fairly evaluate a minting request in every epoch, cus its gonna require a lot of work and attention from the whole community to discuss & evaluate every minting proposal.

While I get the concern on the recurring mintings, I still think giving the DAO the flexibility to request for new KNCs ONLY when its needed is better, than minting a big chunk of KNCs at once & before hand while not having a clear idea if the KNCs will be fully utilised.

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133

How to avoid vote buying with voting proxies? This will most likely end up happening, we must discuss this. I don’t see any ideas of how to fix vote buying collusion. Please let’s talk about this… Why they should participate in the funding of proposals if proxies owners could be bought off with Monero by those who injected the proposals.

Delegators won’t possible know if proxy owners have been bought off with monero behind the scenes? And the delegators will remain happy as long as they keep receiving ETH from KyberDAO. It would be very hard to caught up a dishonest Proxy owner, specially if they are NOT public, they can be caught up and just make another proxy with a different account.

Only solution is that, you only let them participate if they have a verifiable on-chain internal voting system, so the delegators can vote internally within the proxy, so the proxy owner ultimately cannot decide for them, but since the gas cost are always too high in ethereum, this is not an option for small delegators, they use proxies to avoid high gas costs, if they have to vote internally and spend gas it defeats the purpose of using a proxy . So what is the solution?

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134

Sorry, i corrected a lot of grammar errors, English is not my first language. But i want to bump this to bring up the issue again, is been 24 hours, nobody commented.

For example, a certain individual that injected a funding request proposal to make KyberSwap technologically better, this is just a random example, how can we make sure this individual will not collude with proxy owners? IF this individual is asking for a grant of 75,000$ worth of KNC to fund his development, but on the outside he offer proxy owners 25,000$ in Monero in exchange for their loyalty… then why we should allow to vote to these proxy owners, which KNC voting weight is not even theirs? and have nothing to loose but their online reputation as anonymous internet people?

This is a serious concern, i hear you guys.

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135

I don’t think you need to bump comments that are less than 24 hours old and there hasn’t been any other comments. You’ve created a lot of comments on this thread that are kinda just saying the same things over and over and I think it’s sidetracked some of the conversation

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136

I waited 23 hours and 30 minutes to bump it before going to sleep, I’m aware of the 24 hours rule, i participate in various forums. Second, i’ve talk over and over about the issues of inflation, since inflation will be done, this is no in discussion anymore @ShaneKyber has spoken to discuss about safeguards instead, so inflation will be done, this is not in discussion anymore. This new issue I’m bringing on the table about the proxies is relatively new, with no objective answers so far. What would be the safeguard measures to protects us from vote buying or collusion between proxies and the proposal injectors? I expect convincing answers or solutions.

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137

As mentioned earlier, this particular KNC migration proposal is meant to make the KNC token much more dynamic, flexible, and easily upgradeable to support our new Kyber 3.0 architecture and help Kyber adapt to the fast-changing DeFi landscape. The migration might even pave the way for new voting methods that reduce gas costs for voters. This migration proposal has to be approved by the KyberDAO and is not guaranteed. Moreover, it does not necessarily mean that there must be a change to the KNC supply. Any minting of new KNC for specific initiatives such as liquidity mining would have to be proposed and voted on by the KyberDAO again via a separate proposal.

But we do appreciate your many views regarding inflation as well. In general, inflation without limits is a legitimate concern, hence we welcome discussion around stringent safeguards and who the beneficiaries of additional incentives (e.g. LPs, traders, or developers) should be. The views in this forum will help inform the design behind any new version of KNC if the migration is approved.

Regarding proxy vote buying and collusion concerns, let’s shift that conversation to your new post here:
‘Proxy Vote buying concerns and possible solutions before inflation based funding is introduced’ and keep this thread focused on the KNC migration. Thanks!

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138

I think skin should be required of proxies and their weight should be proportional to their skin in game but then people will say this allows only current KNC whales to magnify their voice…but i do agree those entities with significant stake in gov should have significant amount of KNC in project and someone with 0 KNC having 100k knc worth of voting power is a bad idea

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139

I’m still saying, that inflation should only be used to fund technological upgrades (once they fix proxy immense vulnerability), to make the platform more cost-efficient for all parties (voters, LP’s, traders), it should not be used to subsidize and give privileges to any party in particular but the developers that will make the platform technological superior. All opinions here are biased, either they are all dev friends of the team, proxy owners (that want infinite influence over the DAO and 0 risk, and the door 100% open to collusion) or moon boys that think inflation is their ticket to the moon.

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140

Breaking news, inflation based funding can’t be introduced anyways, L2 solutions are needed to avoid being looted by proxies and future devs funding requests via inflation. This is an objective, logical, and reason based conclusion that this thread led us to conclude:

https://gov.kyber.org/t/proxy-vote-buying-concerns-and-possible-solutions-before-inflation-based-funding-is-introduced/152?u=tezoswakenbake

Please read this thread, and comment something objectively and unbiased (in case you are a proxy owner or DEV).

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141

Hi, I am new here, but I would just like to give my two cents on the conversation.

The most contentious issue here seems to be the introduction of an elastic supply model for KNC. Having read through the conversation, it seems clear to me that the objections are not really based on a clear and reasoned argument, but are instead dogmatic ideological positions (i.e. inflation = always bad, deflation = always good). This is simply not the case. As @tezoswakenbake already admitted, his argument is moral. I don’t understand what morality has to do with anything here. You are not looking to be convinced, you are looking to proselytize others. KNC is not Bitcoin.

In actuality, tokenomics are just one lever to play within the sandbox that is DeFi. It’s all about how it’s applied. In some cases, an elastic supply in an AMM-like model can produce impressive results if the TVL is directly tied to the token itself (KNC), so the minting of KNC would be directly related to the onboarding of new value into the ecosystem. This has, for example, been proven to work exceptionally well for Bancor right now.

A deflationary asset within the new system outlined by Kyber 3.0 would would limit it unnecessarily to its detriment. Thus far, I have seen no real argument outlined that isn’t dogmatic, ideological and moral. This is ultimately an economic question that must be backed with hard reason, not ideology. Inflation and deflation can be detrimental or beneficial in certain circumstances, and in the case of Kyber 3.0 I believe an elastic supply is the correct choice.

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142

Hello @Anders we are no longer discussing if inflation is good or bad, the conversation turned all over to proxies which are the biggest threat to our DAO. It doesn’t matter if inflation is good or bad for you or me, what it matters is that we can be looted by bad actors via inflation using proxies. We can’t introduce inflation IF the proxy problem is NOT solved. Please see the thread of the imminent thread to our governance.

This is not about if it is immoral or not anymore, this is about this is about leaving a door open on purpose for very likely bad actors achieve looting us through inflation, Is not about the tyranny of the majority issue anymore, now this is about a rigged system. We can’t proceed to implement inflation base funding for anything if we have that threat that will be exploited 100%. This is something Devs, me and others have been discussing in telegram.

Now, supposing we fix the proxies imminent threat to our governance, meaning, going back if inflation is good or bad, I agree inflation can be beneficial but only to fund technological improvements, subsidizing parties like LP’s will only create artificial market conditions that yes, it will lead us to have more liquidity available which in turn could lead us to have more volume going through kyberswap, but these are artificial market conditions at the cost of KNC hodlers, this condition is not a “proper conditions” made by creating a cost-efficient environment for LP’s, traders and voters that will lead them to use the platform, let’s call this conditions “proper conditions”, which are only achieved by technological improvements that actually makes it more and more cost-efficient for ALL parties (not only LP’s).

So, in resuming, I agree inflation can be used for good, to fund developing and achieve technological improvements that will create the “proper conditions”, this is how it can be used for good. I don’t believe in creating artificial market conditions by subsidizing any party via inflation. This is my personal opinion on the matter that I believe to be objective. You can have yours.

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143

:ballot_box:KIP-6: KNC Migration Proposal is live!
The Kyber team is proposing a KNC migration to make the Kyber Network Crystal (KNC) token more dynamic and flexible with the capacity to undergo upgrades more efficiently. This new KNC token contract gives greater control to the KyberDAO, enabling it to upgrade the token and mint or burn tokens as necessary to better support innovation and growth, bootstrap liquidity, and enable Kyber to adapt quickly within the fast-changing DeFi landscape.

Vote here: https://kyber.org/proposal/23
Read the KIP gist: KIPs/kip-6.md at master · KyberNetwork/KIPs · GitHub
Discord: https://discord.gg/HdXWUb2pQM

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144

I was in denial but after careful consideration I conclude it that If we need to subsidize a party, because others platforms are using this artificial market gimmick method, to attract more volume or traders…let’s do it, but always objectively based on reality.

I will put an example to illustrate this.

Let’s say there’s only 1 competitive platform besides kyberswap

Let’s say kyber is the most cost-efficient platform, that itself will make all parties (LPs, traders, voters) to increase their profitability by its own, without needing to subsidize. But then let’s say that platform 2 is not that cost-efficient, but they want to play dirty and compensate that by subsidizing parties (LP’s and/or Traders) with inflation, I agree that in this scenario we must play their game and subsidize the surplus that these platforms are giving in exchange for being used, and maybe subsidize just a bit more just to be
a little more competitive than them. This is how objectively we can play their game because at the end of the day, the platforms that are the least cost-efficient, the consequence is that they will have to subsidize more, those platforms will be the ones that will be sacrificing more of their token holders. The game is who sacrifices the least of their token holders.

So there must be an extensive investigation to study our competitors cost-efficiency and their artificial-market-subsidizing-gimmicks, in order to obtain just the necessary amount of inflation we need to compete with them. But simultaneously we must always be improving in terms of cost-efficiency, in order to not sacrifice KNC holders as much as them, and be the dominant platform that do not devalue its own token because of cost-inefficiency, in that matter. The game of subsidizing is just a cheap trick, the real game is to be more cost-efficient than them.

And I hope this non-sense inflation short term gimmick, one day can be stopped by all DEXes and mature, it is not beneficial, is only in detrimental for token holders, you are sacrificing your token holders for another party. But well, If is the only way you have my blessings.

Now, please discuss Proxy Vote buying concerns and possible solutions before inflation based funding is introduced - #30 by tezoswakenbake

The Last post from shane and me, was interesting.

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