BNT yVault Strategy Discussion

General Chat
1

Summary
I’m not sure there’s a great way to do a BNT yVault until Aave accepts it as collateral (though even then Bancor itself may be better), but here are some thoughts inspired by discussion in the Next Token for yVaults poll thread.

Would love any feedback or improvements.

TL;DR the only strategy I can see is to move BNT between v2 pools to capture the best APR and rewards and while it’s still in beta it’s hard to tell how effective that would be.

Balancing Mechanics

  • I don’t see a way to take advantage of Bancor V2’s balancing mechanics for yield farming.
  • Previously I was under the impression the dynamic fees would apply to liquidity provision. That is, when a pool is low on BNT I thought the mechanic would asymmetrically reward BNT deposits. Upon a closer read, it doesn’t—it only rewards conversions:
    • Step #5: Dynamic Fees
      “In certain instances, these two balances might drift away. Once the balance of the reserve token is drifting away, the conversion fee will incur a slight increase/discount to assist bringing the two balances closer together.”

Inter-Pool Yield Farming

  • Currently there is just 1 capped V2 pool: BNT/LINK. Once V2 is out of beta (soon?) there will be multiple 2-token pools, each with BNT and another token. Forthcoming pools include LEND, REN, and renBTC, ENJ, and KNC.
  • APR will vary between pools, as will rewards. A yVault could programmatically move BNT between these pools to harvest the best returns, effectively providing the best single location for BNT staking.

A Potential BNT yVault Strategy

  • I haven’t written smart contracts or yield farming strategies before, but here’s a stab at what one might comprise following Andre’s conceptual writeup here.
    • Step 1: Provide liquidity. An LP deposits BNT into the vault and receives yBNT.
    • Step 2: Stake BNT into the top performing Bancor V2 pool. I assume there are API calls to query for this and that we’d want to optimize for both fees and BNT rewards.
    • Step 3: Query for APR and reward changes across all pools and move vault into highest performing pool when applicable.
    • Step 4: Fees and rewards returned as BNT into the vault.
  • Questions:
    • How often will APR change across pools? Is automating this even necessary?
    • Our vault would be a whale — would moving it between pools change the returns? Would it be better to spread it across the top few performing pools?
    • Gas costs? No clue here.

Misc

  • Incentivizing Network Liquidity with Bancor Staking Rewards
    • “Users vote in the BancorDAO on the amount of new BNT created for staking rewards and its distribution to different pools on the network.”
      “The model for rewards distribution is being designed carefully to prevent against the concentration of rewards in one or a small number of pools, and instead, to provide a relatively even distribution of rewards across dozens of pools in the network.”
  • Nate Hindman from Bancor is speaking today at 11:45am PDT on a panel about yield farming, I’ll try to tune in.
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