Since DMM fees are going to be distributed 90% to LP’s and only 10% for KNC KyberDAO voters, then there is not many profits left for KNC investors unless they become LP’s. If we are going to become LP’s, then let’s give 100% of the DMM fees to LP’s, not just 90%. Also, let’s make KyberDAO, so the voters are the Liquidity providers of KNC/pairs.
So in order for original/OLD KNC investors (and new KNC investors) to become liquidity providers instead of regular KyberDAO voters, let’s eliminate the risk of IL for us, which is a huge disincentive for us to become LP’s, I propose that KNC farming pairs are protected from IL from an insurance fund which is funded by the approval of KNC minting by kyberDAO. This way, we can participate on the juicy 100% fees of DMM and become liquidity providers without the worry of IL.
2 key Advantages of IL subsidized protection:
There won’t be any dilution from inflationary emission for KNC holders as long as they are providing liquidity in KNC pairs. If the KNC price goes down because of the minting of new KNC tokens, KNC holders will be the beneficiaries, because the minted coins goes to their pockets increasing their stash, this will offset any dilution due to price decrease.
This will create more demand for KNC token, new investors will buy KNC to get the benefit of the IL insurance protection. This is also a good way to honor OLD KNC token holders, since we won’t need to buy anything to get those benefit because we already own KNC.
There is only 1 rule with number 1 Advantage, so inflation doesn’t become diluting for KNC holders, only KNC farming pairs are going to be insured, this is obvious because if we insure non-KNC pairs like ETH/WBTC, then there will be indeed dilution due to the subsidy because ETH/WBTC are not KNC hodlers.
We can start by insuring KNC/ETH farming pair and KNC/USDT.