I am no expert in DeFi, but LB to me seems like the last little incentive to do DeFi in Tezos L1. What’s left if it is gone as well?
LB is not an incentive for DeFi development.
It’s been 4.5 years, and trading volume is still too low to cover annual inflation of 2.6 million XTZ. I believe the XTZ/tzBTC pool should be converted into a classic pool where liquidity providers receive swap fees, and the subsidies should be eliminated. TF could add liquidity from its reserves to this pool. What’s the problem?
TF and the community must determine how to create conditions that will generate demand for the pool, rather than subsidize it, thereby maintainng artificial liguidity. Currently, until real demand for the pool is created, TF should be the initial liquidity provider, not those seeking inflated APRs from subsidies.
Public goods don’t need to pay for themselves. Inflation is low relative to baker rewards where I see very few complaints.
Also, there are other things that could be done that are far more interesting thinking additively. If there were any prospect of turning the pool into a shielded DEX, that would be far too appealing.
Haaa, these public goods could and should be provided by TF, not through subsidies that go to a small group of people providing liquidity to a pool where the liquidity is not fully utilized.
I will never tire of repeating that liquidity providers should earn money through swap fees, and subsidies should be disabled.
The public goods argument makes sense in theory but the benefits here aren’t going to the broad XTZ community, they’re going to a handful of LPs and arb bots. That’s a subsidy with a narrow beneficiary list, not a public good.
The shielded DEX idea is genuinely interesting but that’s an argument for building something new, not for keeping the current mechanism on life support at 2.6m XTZ a year while we wait.
4.5 years is long enough to know the volume isn’t coming. Switching to off creates the pressure to actually reform it.
1 Like
Agreed. Vote changed. Thanks for your impassioned argument.
1 Like
SIRS is not behind gates. Everybody can make use of this. I never understood why not more people are into it. But I am not passionate about liquidity baking. I changed my vote.
2 Likes
I don’t see the issue. At peak run times in the last year Tezos had over a billion dollars in market volume. One million XTZ to incentivize TZBTC liquidity is not making a difference on selling or buying pressure in the grand scheme of things. If you really wanted to spread it out, it could be split to incentivize additional liquidity on Etherlink but the reality is that money flows into ecosystems that are popular at a given time. A bigger priority should be cohesive integration of L1 and Etherlink into the existing L2 ecosystems and wallets like Trust Wallet, Metamask, and Rabby and Exchanges without needing to set up a custom network. Then we can begin to compete with the likes of other networks (bnb chain, avalanche, etc) that are seen as baseline eth, btc, and usd stablecoin platforms. Until you can open a new trust wallet account and toggle on Etherlink, then use TW swap feature to spend usdc on BNB to receive tzBTC on Etherlink, then we shouldn’t spend our time on minor adjustments to “tokenomics” that don’t really matter.
1 Like
Etherlink currently works great with Metamask and Rabby.
Can you answer my question: what do you think DeFi is for in blockchain networks?
My approach to DeFi is to create demand for the network, generate transactions, and burn fees as a business model principle for self-sustaining the network, where the burn is equal to or greater than inflation.
Why the hell do we need a pool that generates more inflation than fee burn?
This does more harm than good.
When creating the XTZ/tzBTC pool, TF should have added initial liquidity to the pool and held the funds there until there is enough demand for that pool, which could generate competitive income from swap fees, rather than introducing unwise ideas like inflationary support, where liquidity is artificially maintained.
I’m simply amazed at how incomprehensible TF management is with regard to the fund’s money. They were willing to spend huge sums on funding sports teams, but at the same time, they didn’t want to add initial liquidity to the XTZ/tzBTC pool. Instead, they decided to create a LB to attract third-party liquidity, creating additional inflation and putting further pressure on the XTZ price.
How can these actions be characterized?
Are there bears in TF management who profit from the decline in the XTZ price, or does TF management need to learn financial literacy?
Blockchains increasingly will be based on use cases, either long term store of value or exchangeable real world assets. Ease of use for largest number of players and security with large liquidity and low fees will be relevant. Changing LB will have very little effect on price action long term. Everyone said changing the economic model of inflation would change the economics and look at the price action. The reality is headlines still drive prices and Tezos will either become more relevant with time or it won’t, LB is irrelevant to the conversation and clearly there are people who still appreciate its value.
1 Like
I hear your broader point on UX and integrations, and I agree those are critical. But I don’t think that makes LB emissions “irrelevant.”
2.6M XTZ/year is not a rounding error. Even if it’s not the single biggest issue, it is still a meaningful recurring cost with real opportunity cost.
For me this is a capital allocation question:
- Are we paying for something that is producing measurable network-level return?
- Is that return better than alternative uses of the same emission?
- If not, why keep paying it indefinitely?
“Not the biggest issue” is not the same as “doesn’t matter.”
By that logic, almost every fix outside the #1 problem gets dismissed.
I also don’t buy the either/or framing. We can push wallet/exchange integration and still stop or reform an inefficient subsidy. Those goals are not in conflict.
If someone believes LB still creates net value, great! Show the numbers and define the success criteria. But absent that, continuing a 2.6M/year emission just because bigger problems exist is not a strong argument.
I am really hoping to hear from some more LB proponents here making an argument for LB, not why it’s not significant enough to deal with.
1 Like
Your judgment is incorrect. I’m amazed at how much the people at Tezos to have your head in the clouds. Tron’s economic model shows that it’s not just news that matters, but the proper construction of the network’s economy. I’ve heard many times that Justin Sun is a scammer, but he was ultimately acquitted, and TRX holders are very happy with him.
But of course, Tron’s economic model is finite. They can’t constantly increase the cost of network fees, and it’s also impossible to force people to constantly increase the amount of TRX they stake to make transactions free. But perhaps this will work for a long time, time will tell.
This is true, but it doesn’t contradict the economic model where all network fees must be burned. It merely complements this idea. The network’s success will be measured by whether the burning covers inflation or even exceeds it.
Therefore, the idea of reducing inflation by all possible means, such as introducing AI and disabling LB subsidies, is an acceptable proposal.
I’ll reiterate that TF should have been the initial liquidity provider for the XTZ/tzBTC pool and held funds there until sufficient demand for the pool was met, so that other people would be interested in becoming liquidity providers for this pool due to the attractive APR due to swap fees.
Why can’t you understand this? It’s logical and perfectly organically.
Three weeks ago, I sent a link to this discussion to representatives of Kiln and Everstake. Everyone knows that these are large public bakers on whom the outcome of the vote often depends. They chose to vote ON, but for some reason they are ignoring the discussion.
Where is Arthur, as the initiator of LB?
Why are they all silent!?
bro breathe… the same narrative your pushing is also reductionist. LB changing doesn’t mean that boom number go up… Tezos price action is much more correlated with BTC price action than with any sell from LB providers. I think you’re being very adamant because you’re passionate about this issue, which is clear from the history of your posts… so make a protocol proposal that will create the changes you want to see and we can all vote on it.
Dude, you still don’t want to understand me, and regarding the proposal, I don’t know OCaml to change the code and put the proposal up for voting.
You clearly have a broken cause-and-effect relationship.
I don’t hold out hope that eliminating LB subsidies and burning all network fees will lead to organic price growth for XTZ right now, but I’m simply proposing that we clean up the network’s economics, and the sooner the better.
Reducing inflation and increasing burning are key to the network’s success.
We need to ensure that XTZ is a coin that store of value, not eroded by inflation.
Reducing inflation means implementing Adaptive Inflation and disabling LB subsidies.
Increasing burning means burning all network fees, which can be increased either by transaction costs or transaction volume.
To increase transaction volume, TF and the community will need to work hard on user acquisition.
Given the current inflation rate and low transaction fees (0.001–0.002 xtz), the network needs to process approximately 25 billion transactions per year for XTZ to become a deflationary coin.
At the moment, the price of XTZ will be formed only by faith and manipulation, since the economy is not established and the network usage is low, but this does not mean that what I propose should be postponed until later.
I’m open to changing the tokenomics of Tezos
