Providing users an option of receiving a proof of liquidity token in exchange for their deposit into any BarnBridge pool.
We are accustomed to receiving liquidity proofs when depositing into most protocol pools, this proposal suggest we make it optional.
Upon deposit to any BarnBridge pool, users are given the option to receive a proof of liquidity token in their wallet. If the user accepts, the deposit is made and exchanged for their specific proof of liquidity token (Ex: Depositing into Uniswap and receiving an LP token). If the user declines, the deposit is made and their liquidity proof is held in contract and no proof of liquidity token is provided to the users wallet (Ex: depositing into pool 1 with Barnbridge). Both users are able to view, withdrawal and interact with the protocol in the exact same way, only the user who declines a liquidity proof will be unable to provide this collateral proof to another protocol.
Tax efficiency: Many taxing authorities view token swaps as a disposal, exposing depositors to potential tax liability. Consider the transaction of depositing into Aave and receiving their corresponding aToken as a disposal. Should BarnBridge retain proof of liquidity within the contract it could eliminate this potential liability.
Swaps between BarnBridge Pools: - Ideally BarnBridge grows its product offerings to allow exposure to the bulk of the crypto market, while simultaneously allowing targeted strategic positions. These options mean you will be moving between pools and adjusting your exposure overtime. Its feasible you could swap between pools/positions without any token wallet transactions and have potentially no tax exposure. Gains would only be realized when funds are withdrawn from the pool.
Sticky Capital: If users are able to manage their positions and avoid tax consequences its possible capital will be reluctant to leave, leading to higher revenue for the protocol.
The goal is to provide users the option to avoid any transactions that would qualify as a swap/disposal. Sending tokens to a pool is typically not seen as a taxable event if you don’t receive a token in exchange. An illiquid protocol currency, USDb, could be used to manage users credit balances within the protocol.
- Tax efficient
- Improved UX via optionality
- More efficient asset swaps
- Added complexity
- User surrenders their ability to provide proof of liquidity to another protocol
- Regulatory scrutiny.