Agree with Arthur on this one. Highly likely that I’ll vote in favor of this proposal.
perhaps this has been designed as a safe way for TF to wrap some of the BTC they own
Thank you @murbard for clarifying.
Can you expand on your point that the consortium (BitcoinSuisse, Taurus, etc.) are not getting anything out of this? The increase in demand for tzBTC would, in my mind, drive higher revenues from minting fees for consortium members.
Per the docs on the site, the minting fee is 0.22% divided between key holders. Assuming roughly $150M get minted for this, you’re looking at about $330k in fees divided by between 4 key holders, or about $80k each.
That’s nothing when you consider how much liquidity opens up for tez holders. The net result is positive for Tezos.
How do we know if the trading fee that it will be charged later to traders will be enough to offset the diluting inflation? Isn’t that subject to trading volume? If not enough volume, there won’t be enough TEZ to offset what is being printed out. Meaning, we can actually lose (inflate) or profit (deflate), depending on the volume, is a risk.
You don’t, if it does is just cherry on top.
Okey, so is a risk. Who is taking that risk tho?
I know you said that the block rewards that bakers earns are not being touched. Because the protocol will keep paying the 80 TEZ block reward to bakers, and we just print an additional 5 TEZ per block to subsidize LP’s. In absolute numbers, they are not touched, but in terms of % of share of the block rewards pie, we do lose a % share of the block rewards pie.
Before LB, we were earning 100% of the block rewards, now after liquidity baking, only 94% of the share of the block rewards will be paid to bakers, 6% will now be lost elsewhere due to LP dumping them, and recovered elsewhere due to traders paying that fee, but it will end up burned.
But then why it must be burned? Why not the TEZ that the trading fee gathers, is not just put into a contract that distributes that TEZ to bakers depending on their stake or number of rolls? So we can at least get back the 100% (or the 99% with a loss… or 101% with a cherry profit on top) of the block rewards pie share that we had before?
Then we distribute the block rewards as usual to delegators through the baker fee as it always has been done.
As side note: Why not just TF bakers rewards fund that liquidity baking, so they take that risk instead of us
Or just let the TF offer a grant to such LP to provide liquidity. Id rather see this risky protocol change be proven with a proof of concept. Show it works rather then gambling on it working. No need to risk all holders/bakers on something that might or might not work. It working out is great but the chance that it doesnt would affect value of tezos which is already damaged and bruised enough, and most end users/holders/bakers cant stomach that anymore. Its a risk most cant take, while the small few can like the TF.
Next to the fees it is promoting this specific consortium. It increases their visibility and grant credibility. It is one of the most important things in the space.
It has also not been made clear if there are any conflicts of interests.
Does anyone associated with TF e.g. own a stake in one of the companies? Are there any other business relationships?
The bakers are expected to pay for this endeavor as it has already been stated and they cannot just raise fees because the customer does not understand this connection. with giving no other option the ones “complaining” are marked as enemies of the progress need to increase the adoption.
I do want liquidity but the proposal does put pressure on the financially losing side (bakers) and endorses specific companies on the other. I think this is hard to deny and needs a solution and or explanation.
I’m no technical guy, so I may misunderstand much here, especially the technical nuances. The issue I see has less to do with what type of asset is supported but that there is a proposal by what ought to be a purely technical team to inject some type of “economic policy/stimulus” (beyond simple protocol inflation for network security). It amounts to a commercial decision by a “state actor”, instead of the “private sector”. It seems counter to the spirit of decentralisation. A top-down approach, so to speak, instead of a bottom-up approach with the implicit expectation that bakers rubber stamp it. Perhaps a better lead-time with more interaction (AMAs, etc) would have helped allay some of the mentioned concerns…Again, happy to be shown the light - this is just the current feeling I get with this.
EDIT: I have obviously missed this Liquidity Baking: A Decentralized XTZ / TZBTC Pair - Part 1 . This was presented a good few months ago but discussion about it doesn’t seem to have taken off. I believe I have met Sophia in NYC at and was struck by her intelligence and technical knowledge. As such, I am grateful to see such smart people working on Tezos and the idea of this liquidity baking is innovative and merits discussion.
Again, the main issue to me seems that this was injected as part of an “official” technical upgrade by what seems like a private initiative (yay!) - just as it was intended for Tezos. At the very least, there should be two proposals. Sure, costs, more and takes more time. But that seems like a small price to pay for this kind of optionality and a much more subtle way to propose something so new.
Also, I still haven’t fully grasped the actual benefit that this would bring vs simply having this pair on another dex. There was also a similar question on reddit earlier. Why is this so important that it deserves to be included in an official proposal? There seems to be limited understanding to that regard and it might help to ELI5 and get people excited about it.
I had some Ideas to improve liquidity baking, any feedback would be appreciated
What if we downvote LB until we have properly tested wUSDT/wUSDC/wWBTC or even actual USDT/USDC on tezos?
The point of LB is to make tez liquid onchain but we can’t make it liquid in a pair with an illiquid token that is not traded anywhere (tzbtc).
In reality by LB an xtz/tzbtc pair we’re subsidizing tzbtc instead of xtz because tez is way more liquid onchain and offchain
Besides, tzbtc is not bitcoin. you can’t swap it to bitcoin on any other network without interacting with Bitcoin Swiss that requires KYC.
On the other hand you can unwrap wWBTC/wUSDT… in a decentralized manner. however it’s not properly tested yet
The inability to swap tzBTC to BTC is also my main concern. If there was a bridge or something similar to easily convert tzBTC to native BTC I would be all for it though.
Nah, not more tests. I like that ‘Tezos’ takes a small risk with liquidity baking. We must move fast now.
Liquidity Baking seems like a fantastic idea but the way it’s proposed to be implemented sounds like a top down business decision from someone high up at the Tezos foundation.
My first major concern is how the asset is selected. Can someone explain why tzBTC? It’s a little known unpopular wrapped asset from what I can gather. I would think that LB would be much more effective with an asset everyone knows and trusts such as wBTC. The asset that is subject to liquidity baking should be chosen INDEPENDENTLY by bakers imo. Also this is unhelpful unless someone cares about trading Bitcoin for Tezos. I would much prefer LB for a stablecoin pair such as XTZ/kUSD a decentralized asset contained completely in the Tezos ecosystem.
The second major concern is other assets are effectively subsidized by XTZ rewards that previously went to Tezos bakers. This is not good
Is this just a fancy way for the TF to earn extra money with their Bitcoin?
My thoughts exactly.
I think it would be odd to put liquidity baking into protocol update. When there’s demand for tez, liquidity and trading volumes will sooner or later appear itself. Therefore, right now I think it would be best to continue doing what has been done recently; create awareness, promote end-user demand for tez and improve the protocol fast.
That’s hilarious you used the length of time it’s been around as you basis for you decision instead of the actual usage of the asset re. tzBTC vs. wBTC
Can you explain your reasoning on using this metric as a the sole basis for your decision Arthur? Also can you explain who’s making these decisions? It’s very opaque…
On a extra note:
Why are we increasing the purchasing power of a POW asset that destroys our environment, we all mock with every second post in connection with e.g. clean NFTs and we aspire to overtake in usage and marketcap?
We do give money to buying Bitcoin? Am I the only one finding this odd??
I would make a stable coin pool as well. Why not Euro?
I like the idea of liquidity baking but I would much rather see it being done with USDC or USDT. Unfortunately we still don’t have either of them integrated. Better to wait?