I am hoping someone can alleviate this simple bakers concerns ?
1/ I am concerned about the risk that LB will put additional and continuous downward pressure on the XTZ price.
Where will the majority of the additional XTZ generated flow to ? Would it end up being sold on a CEX by those who have the rights to do arbitrage, and would this put downward pressure on the XTZ price ?
E.g Arbitrators will sell XTZ for BTC on a CEX, mint tzBTC from the purchased BTC, and then sell the tzBTC for XTZ on the Dex contract at a premium caused by the pool subsidy. The XTZ profit earned from the arbitrage is likely to be locked in by cashing out to BTC. There seems to be a risk that LB will introduce additional XTZ on the supply side of CEXs and this will be detrimental to price.
I wouldn’t be so concerned about this if the BTC to tzBTC conversion was an open market (and therefore efficient), even better if we had the opportunity to take advantage of the arbitrage opportunities ourselves, but it is not and we cannot.
2/ I am concerned that LB will unnaturally distort the delegation market and that as a public baker, I will bare the cost of this. That is it will cause our customers, who we have spent time and money attracting, to move their XTZ to the pool. Further, I am also concerned that if LB provides better returns than running a public baker, at a similar or lower risk, that it undermines our entire public baker investment.
Would the additional returns offered by LB encourage our customers to move their XTZ to the pool and therefore reduce the XTZ staked to us, reduce our income, and require us to spend more time/money to attract replacement customers ?
Are we likely to get a better return at a lower risk contributing to the pool than running a baker? ( if this is true, i also wonder if incentivising the narrowing of the delegation market is a good thing in itself)
Of course its ok to loose customers, or for your investment to depreciate, because of market forces. However, this isn’t a market driven outcome, it is a governance driven outcome that we have a say and it would be illogical for us to support a decision that negatively affects our business.
I hope someone can help alleviate my concerns