Idea for getting Ithaca without liquidity baking

Philosophy and Economics
1

Hey Tezzies,

This is a proposed compromise in which we get Ithaca without liquidity baking (LB).

Given the controversy over LB and the “no” votes from PosDog, TezosWakeNBake, and others, there’s a danger Ithaca won’t pass (follow the vote here). That would be very disappointing, as Ithaca contains the Tenderbake upgrade which among other things enables fast finality and a path to faster block times.

Ideally, we’d have competing Ithaca proposals, one with LB and one without, and bakers could straightforwardly vote for what they want. Unfortunately, we only have the proposal with LB, so there’s no way for bakers like PosDog to simultaneously show their support for Tenderbake and their opposition to LB.

Here’s the compromise idea: The larger “yes” bakers meet with the larger “no” bakers. The “no” bakers agree to change their “no” votes to “yes”, and the “yes” bakers agree to activate the LB escape hatch as soon as Ithaca is activated.

In this scenario, LB is effectively removed from the Ithaca upgrade without requiring a new amendment be injected. Tezos gets Tenderbake and we get another 10 weeks to come to a decision on the future of LB.

How does that sound?

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I’ve been around since C23. I’d much rather see the vote turn out “no” to send a clear signal to the devs that bakers want more choice in protocols and to not be strong-armed by only having a single choice.

To often people cry out “if you don’t like it, then you propose a protocol”. I would love to. Point me to the documentation that teaches me how to take the current mainnet and create a new protocol, generate the hash, and inject the proposal. The existing docs that I found make way too much assumption on the reader’s knowledge of how to develop against Tezos.

Additionally, I’d like to see the voting system change so that the proposal period and the “upvote” period are different. Too often bakers just vote ‘yay’ for the first proposal without even looking at it and ignore anything that comes later in the period.

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Sure, documentation could be better, but it’s not like it’s impossible to do. For example, how was Kevin able to find not one but two different devs to help him?

Second, tell me when in the governance history of the network have we had multiple choices when there wasn’t an identified bug involved? It’s always been take it or leave it, and this time is no different. Claiming that devs are trying to strong arm us bakers to vote for something is quite a stretch, as the injections have always been either take it or leave it, and if you want something different, well then go make it happen. Tell me how this situation we’re in with I is any different?

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Point me to the documentation that teaches me how to take the current mainnet and create a new protocol, generate the hash, and inject the proposal.

Here for “take current mainnet and create a new protocol; generate the hash” and here for “inject the proposal”. If you have any question regarding this, don’t hesitate to ask them on https://tezos.stackexchange.com.

Additionally, I’d like to see the voting system change so that the proposal period and the “upvote” period are different. Too often bakers just vote ‘yay’ for the first proposal without even looking at it and ignore anything that comes later in the period.

Don’t hesitate to push a draft on the TZIP repository and open a thread on the TZIP category of this forum.

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Second, tell me when in the governance history of the network have we had multiple choices when there wasn’t an identified bug involved?

It happened in Athens, Florence, Granada, Hangzhou, and Ithaca.

For Athens, the choice was about the roll size (see Nomadic Labs - Athens: Our Proposals for the First Voted Amendment). For Florence it was about Baking Accounts (see Nomadic Labs - Florence: Our Next Protocol Upgrade Proposal). For Granada it was about Liquidity Baking (see PsmarYW: Granada without liquidity baking) . For Hangzhou and Ithaca it was about the asset used in Liquidity Baking (see Hangzhou (PsCUKj6wy) and Ithaca ‘Ipanema’ (PteJgr89X) which both propose to replace twBTC by USDtz).

The injections have always been either take it or leave it, and if you want something different, well then go make it happen.

To me “take it or leave it” is the opposite of “if you want something different, well then go make it happen” and neither describes well the situation because both assume a fundamental separation between devs and stakeholders.

First, no code is written unless someone wants something different, obviously.

Second, amendments are co-signed by several entities, these are developer teams and sometimes individual developers. The list changes very often because joining the group is easy and does not require a long-term commitment.

Third, the onchain vote is the very end of the development of a protocol feature. Discussions on where we want Tezos to go should happen much earlier. Anyone who “wants something different” should first have it discussed on this forum.

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Personally I believe all economic decisions should be done in the main L1, where is based on super majority governance. Super majority is based on, the fact that the minority which is the 20.01% voice must be heard and so the 79.99% majority can’t abuse and step on the 20.01% minority.

The escape hatch is just for emergencies in case of smart contract exploit, sure it can be used to end LB subsidy, but it should not be a replacement, for a proper no-LB proposal voted on L1.

I don’t want to make the economic decisions in the escape hatch, which is a foreign governance system, not like the L1 governance system where it has the 80% super majority threshold. I don’t trust the escape hatch to take the economic decisions there, and I simply no more am I going to succumb to the whim of others that the escape hatch is where economic decisions should be made.

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I don’t think its a fair compromise for the bakers who want LB have to agree to remove LB. A compromise is both sides walk away with something. This proposal already includes a significant reduction in the requirement for the escape hatch. I feel thats a fair compromise.

Its been pointed out that PosDog lost a significant percentage of their staking balance in the 72 hours after they voted no. Several people have also posted on Reddit asking for advice on delegating away from No voters, and asking if theres a way to not have their XTZ counted towards that No vote. Seeing all this, I don’t personally feel like the support to remove LB is as strong as it seems.

I too was a delegator to PosDog, and I too moved to a yes voter as I want to see LB continue as well as tenderbake

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It’s not only about liquidity baking. It’s about the Tezos governance process, and whether it’s desirable to bundle unrelated updates together in a single proposal, especially when one set is not controversial and the other is.

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Exactly.

Yay voters can also be boycotted by delegators that feels governance is more important than tenderbake, but the only ones calling out for delegation boycotts are yay voters… whatever, good luck convincing people to be taxed for another 10 months to fund something that doesn’t give back any value.

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I agree the governance process can use some work. I personally don’t like that if a bug is discovered, the only options are to accept it or cancel the entire process and go back to square one. I do think there needs to be some aspect of edit-ablity in case an issue arises.

I also don’t like that when a baker votes, a snapshot of their rolls is taken at that time. If a delegate is unhappy with the decision, they are unable to remove their funds from that vote. The only option is to change baker and hope the loss of funds changes their mind … which is probably unlikely.

Re: controversial nature of LB:

  1. This didn’t just pop up one day. Nomadic discussed their thoughts and plans publicly before even starting the work. Worked with multiple other companies to make it happen (who also discussed it publicly), and it took quite some time to produce. They were very upfront about their plans and faced little to no backlash while this was being discussed/worked on.

There are a lot of very unfair comments/arguments around the nature of this being bundled together. They announced this would be the case ahead of time and included a mechanism to turn it off immediately if anyone didn’t see the discussion and didn’t like it, or it caused any unforeseen issues, if the majority agreed. In the interest of fairness have now reduced the escape hatch requirement, very significantly.

I agree the governance process could be made better, but I have no issue with how this was done. As of yet, I certainly don’t think it has been abused to force something harmful into the ecosystem. You have to remember that these are independent companies. They are free to propose whatever they like, and we all vote. Demanding that they take on significant effort and cost to maintain dozens of different branches so that everyone can vote for each combination of specific features, is not feasible. Also demanding that new features go in proposals one after another will drastically slow down innovation and progress. New features will take an order of magnitude longer to be injected.

Anyone writing a proposal does so with the knowledge that if they produce something dangerous or damaging, that they stand to loose all the time, effort and money put into the entire proposal. Its in their interest to make sure the community are onboard with the ideas prior to launching the proposal … and this happened in this case.

I see nothing wrong with LB, that requires derailing this proposal to make sure that its stopped. The combination of proposals open to anyone and the escape hatch I feel is more than fair.

  1. The actual controversy stems from a minority, many of whom are sowing doubt in the community through the use of lies, false statements and mis represented facts. For example Mack has a video on youtube where he suggests the reason Nomadic didn’t build/maintain a frontend for LB, is so that they can keep it secret from the community to artificially keep the APR high. This is a complete lie, utter nonsense and very conspiracy theory-esk. There are many frontends available, even temple wallet has natively integrated it to their swap functionality.

I don’t think LB is perfect in anyway, and i’m perfectly onboard with discussing whats the appropriate token for it to use. I have no issue with the feature, how it was injected, how its maintained etc. The only issue I have is the lies and false statements being used to manipulate the community into one direction

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Its the Nay voters that started any boycott. There are posts on agora from Nay voters saying they will vote no until LB is removed or split into a separate proposal. It is individual delegators going to reddit to ask for advice in how to move away from bakers voting no.

Can you also please explain “LB is a tax”. Who is paying a tax in order for LB to exist?

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The boycott was not even done, boycott means not voting, so it doesn’t reach quorum, but we all voted nay instead.

If LB is funded by an inflationary tax, then the one who pays the tax, is the XTZ hodler. All monetary emission that produces inflation, is a tax, on the holder of that money. This happens with all currencies in all the world, if there’s monetary emission, and the emission is used to fund a public program (like LB) that is not returning any value back to the hodlers of that money, then it produces inflation, and inflation dilutes the purchasing power of that currency, every major economist will tell you, inflation is a tax on the hodlers of that money.

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Changing the boycott to a campaign of voting no and pushing for others to do the same is basically the same thing. Both are an attempt to stop it

that is not returning any value back to the hodlers of that money,

While building an app, LB has become one of my major testing tools, as its properly supported on Testnet and Mainnet. I use it on mainnet every few days. I’ve earned greater returns from those tests (without looking at charts and picking the right moment), than I have on many Quipuswap liquidity pools.

The large scale institutions converting bitcoin into tzBTC, does this not also bring value/wealth to the chain as well?

And the increased transactions its caused, does that not also generate revenue and returns to many?

I’ll admit that financial maths is not my strong suit, but i’m having a hard grasping this. Has someone definitively proven that it has directly caused a negative impact? or are these arguments based on past examples?

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Regardless of whether it does or does not. I’d politely request to use the phrase “LB causes inflation” rather than calling it a tax. The word “tax” in this context is quite vague and has lead to a lot of confusion on social media. Many have taken to link it to some form of income/captial gains tax, meaning that the subsidy is coming directly out of someones wallet. Inflation is not the first thing someone thinks of when they hear tax. “LB causes inflation” is much more accurate and will lead to less confusion

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No, it is not a boycott, NAY voters are actively participating in the governance process. Unless you expect us to vote always yay, we are participating actively.

These are a lot of false statements. Yes I see you like the big returns, just remember, that we are all paying your profits from our pockets. No large institutions are converting their BTC into tzBTC, who told you that? We have had 800 tzBTC minted so far since we started, no new BTC converted into tzBTC. There’s barely no trading volume in the liquidity baking contract, without volume, no XTZ will burn that can offset the inflation generated to fund LB, without volume, there are no whales using tzBTC to invest in XTZ. Have you seen the volume in the liquidity baking contract? It is barely $300,000 daily average, that’s literally nothing. TzBTC failed as an asset for LB.

It is a tax, IT doesn’t matter if it is taken from the balance of your wallet or from monetary emission. It causes the same dilution of purchasing power to the taxpayer. If they take money from your balance of your wallet, you get less money to buy stuff, also with inflation, if they print money you get less money to buy stuff, no difference whatsoever. People can call it what it wants, I’m glad they are calling it for what it is, a TAX.

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No, it is not a boycott, NAY voters are actively participating in the governance process. Unless you expect us to vote always yay, we are participating actively.

The point i’m making is that you complained about a boycott against you (or bakers like you). But those said bakers first announced plans to themselves create a boycott. Instead you voted Nay (which is acceptable). But is it fair to complain of the response from a portion of delegators if you’ve gone against their wishes? You are welcome to vote how you like and I would never put pressure on anyone to vote one way or another. But complaining that people don’t like your vote, doesn’t seem fair

No large institutions are converting their BTC into tzBTC, who told you that? We have had 800 tzBTC minted so far since we started

Did large investors not stake bitcoin to create this 800 tzBTC? I heard there was many teething issues around the launch of LB about getting more tzBTC and it lasted for some time. But I thought I also heard that a lot of those have been ironed out and whorton (for one) was now actively accepting trades?

I’m not here to argue that LB perfect in everyway, but the language being used against it is “complete failure”, “disaster”, “tax” - these are all super negative and aggressive terms. Not being backed up with a lot of evidence. If its so obvious that its having such a negative impact on the price, where are the charts/metrics/data/analysis proving this? I’ve not seen any of that, just youtube videos making wild allegations

Again i’m not expert, but your point for $300,000 daily being nothing. Thats frequently higher than pairs on quipuswap. So its not really LB or tzBTC then, its Defi on Tezos if LB out performing the major dex?

I’m glad they are calling it for what it is, a TAX

I’m not glad that this phrase has lead people to falsely believe that it is some sort of income tax, directly being debited out of bakers hands by the protocol. In technical terms, yes it is a form of a tax. But the actual word to describe it is “inflation”. Both are bad, but one more accurately explains the issue (and would help others understand it too), and the other leads to confusion and angry fights.

I’m trying to understand the issue, and trying to help others too. I’m not trying to cause confusion or anger by using terms in a vague manner. I’d appreciate if others could do the same and keep things civil and easy for everyone to follow

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Inflation is a tax, every major economist will tell you this.

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Who is the taxypayer? the XTZ hodler.

LB is not returning any value to the XTZ hodler in any way. Very little value is being returned to the taxpayer, it has proven not being a good investment for him, at least not with tzBTC. And there is a lot of evidence of tzBTC inefficiency of returning value back to xtz hodlers, no volume, no price increase due to LB, nothing.

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A car is a form of automobile, but everyone calls it a car because automobile can mean many things. People like to be specific to avoid confusion

So its clear that this phrase is causing confusion and anger due to the vague manner in which its being used. An incredibly fair compromise of using easier to understand language was proposed and you refuse. Instead simply barking “thats what economists say”. The vast majority of the ecosystem are not economists and are getting confused (myself included).

Refusing to help people understand the problem/the point you are arguing, says a lot about your actions. Have fun manipulating the public

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Is not a manipulation, is how it is. You have been trying to manipulate people into thinking TzBTC is giving results, while it is clear, there is EVIDENCE, that we are just wasting money funding the lps.

It is a tax, you like it or not, and like all taxes, there is a taxpayer. Money doesn’t grow in trees.