Turn off oVCX discount until there is more liquidity
Yes
No
0voters
Summary:
Given the recent price action of VCX due to oVCX redemptions and sell-offs, I propose turning off the discount price until more liquidity is available. This liquidity could come from users deploying WETH & VCX in the main Balancer pool or from liquidity on centralized exchanges (CEXs). This proposal addresses the net negative effect oVCX redemptions are having in the short term, which ultimately does not benefit all VCX holders, except for the select few who are redeeming.
The above downturn started on November 25, 2024, when the discount price was properly adjusted.
Proposition
This proposal aims to avoid the net negative effect on the VCX price due to the lack of liquidity in the pool. The incentive mechanism to earn up to 5X on oVCX if users lock veVCX for up to 4 years is not incentivizing as much liquidity into the Balancer pool as hypothesized. Therefore, the best alternative is to turn off the discount price while allowing users to continue earning oVCX to redeem in the future when there is much more liquidity in Balancer and/or on CEXs.
Implementation
The implementation would be as follows:
Technical Adjustment: Change the discount price to zero.
Manual Oversight: The core team will manually manage and adjust the discount price based on market conditions and liquidity levels.
Reactivation Criteria: The discount price will be adjusted when there is either over $1.5M in liquidity on Balancer or when VCX is listed on CEXs.
Conclusion:
This proposal addresses and benefits the entire ecosystem of VCX holders (1,350+) and attempts to preserve the value of VCX until there is more liquidity. Given that VaultCraft is actively pursuing listings now, with market makers already onboarded, this should not be a long-term concern. Liquidity providers can continue earning oVCX rewards, which can ultimately be used to exercise for VCX in the future.
Who should put liquidity into the balancer pool and why? (What’s the incentive) And how and when will liquidity be provided from people trading vcx on a CEX?
I do think the oVCX discount should be turned off cause of the negative effect it has on VCX, VCX was inching close to an all time high following the trend of ETH, right now this doesn’t look good
If the discount is set to 0 then we need another source that brings us liquidity. If we don’t have that source it would be better to to “ride it out”. Those wo really want to exercise and dump VCX at this price should do that. The protocol could simply accumulate all the ETH earned in the process and start the buyback as soon as the dumping slows down.
I think the ultimate goal is to reverse the direction of the VCX chart. Right now, oVCX is causing VCX to dump, while only a 3 users exercise and sell. It makes no sense for the rest of VCX holders.
Also, I hear big hedge funds are about to adapt V2 Gnosis Safe Vaults, which will spike the TVL. Thats where the liquidity will come from. (Alpha from Devcon)
So after almost two months of oVCX being unusable, you opened the floodgates and got surprised by the flood?
Of course people were going to sell. Then they’ll stop, and because liquidity is thin you can efficiently pump the price back up with buybacks afterwards.
Setting the discount to zero now will just continue the sad dynamic of token holders versus users you created by repeatedly undermining oVCX. It’s also an admission you don’t have the confidence or trust of the community to convince them to hold VCX after redeeming oVCX, even in a bull market with tailwinds like a CEX listing and V2 coming up. That trust can be rebuilt, but this is a step in the wrong direction.
But no point in arguing. You killed the TWAP-based discount right after posting this proposal and are now manually resetting it higher and higher to prevent anyone from realizing profit from oVCX before it passes. Which it will because you control more than enough veVCX to make it happen.
