TL;DR
We have taken a critical and hopefully unbiased approach in this review with the ultimate goal of recommending how to improve the program going forward. The Balancer grant program does not exist as an ROI based system, while some grants may fit into this category like yield and swap aggregators, it generally exists to fund new ideas/use cases, make Balancer easier to use and ultimately encourage more people to build on and use the protocol. We have set out in this process of a recap to work out what grants were successful (whether that be through revenue, adoption, views, education, ease of use or proof of concept), what weren’t and why so that we can better inform decision making and direct grant funds effectively in future funding Waves. The results showed that although successes were reached, there is room for improvement outlined after the recap summary below. Raw data can be viewed here.
Recap Summary
Grant historic value assessment has been difficult due to:
- Lacking pre-set impact tracking metrics
- Discontinued products by Balancer (Managed Pools and Boosted Pools)
- Projects sunsetting (examples include: Aztec Bridge, Boot finance, mistX, Skytale etc)
- Old projects with no information (Approximately pre-March 2022)
- Downturn in market conditions since program genesis (Balancer Grants has been running from August 2021 - Present)
Grants that have provided impact had some or all of these in common (subjective or data driven):
- Capable and/or well known team
- High quality deliverables
- Fill known need or functionality
- High adoption due to good visibility
- Made Balancer easier to understand/use (coupled with good visibility)
Recommendations
We believe the Balancer Grants program can explore several areas to improve the likelihood of successful and high impact grants. These are:
Assessment and approval
- Include value/impact assessment metrics from approval.
- GTM strategies for new projects.
- Grant expected durations and a buffer to be agreed.
- If the regulatory path is unclear, avoid funding unless there is a major value proposition.
Budget
- Experiment with directional budget. This concept could include: setting aside a small budget for public goods, research or moonshot projects that have an indeterminate chance of success but the potential to lift Balancer or DeFi generally.
- Currently, we have decided to not fund hackathons or events until there are the technical resources in Balancer to support such an undertaking.
Visibility
- Agree on grant pre-/post-completion visibility plan with grantee at time of approval - retweeting, medium articles, AMAs etc. Plan can be updated as it progresses.
- Make tools hub more visible - investigate adding link to FE
- Make completed grants hub more visible for people to find links/info. Currently exists only through grants Notion.
Grant Program
- Communicate RFPs through socials and Discord channel to increase visibility and adoption. Reach out to known teams to apply.
Categories to direct funding:
| Category | Why / Why not |
|---|---|
| Analytics | Continuously improving analytics and encouraging existing projects to include Balancer drives volume to the protocol. Clear value. |
| Custom Pool Types | Custom pool types have the highest potential value to Balancer but are risky. These projects create new use cases and showcase Balancer technology. |
| Education / Tooling | Very important to make Balancer more user/dev friendly and drive adoption of building and investing in the platform. |
| Research | Research has been generally avoided after early failed proposals. Recommendation is to revisit funding research as optimizations or new use cases may prove valuable. Risky with low likelihood of payout but high potential payout. |
| Swap Aggregators | Swap aggregators create more revenue streams. Strategic grants may be considered. |
| Wrappers / Infrastructure | Can lower barriers to entry for other projects looking to integrate with Balancer and provide additional revenue streams |
| Yield Aggregators* | Only with a direct value calculation. There are generally sufficient incentives for yield aggregators. With no yield bearing assets, this is not worth funding. If the aggregator has the potential to bring high volume and TVL of yield bearing assets, then a value calculation can be made. |
More recommendations and the inherent details are discussed at end of post.
1.0 Purpose
The Balancer Grants program has been running since September 2021 over 10 Waves of spending. It is a known issue amongst grant programs that tracking impact is a difficult thing to quantify not only in web3 but generally across all organizations. Therefore with a planned slow down in Q4 2023, the committee has undertaken an assessment of the approved grants to date in an attempt to understand where we are seeing the most impact and where we are falling short in order to best direct resources in 2024. From this we also plan to determine how we can set up processes to improve monitoring and assessing impact to make this easier to iterate in the future.
All grant information was collated and assessed for value or impact to the ecosystem for TVL, volume, revenue, views, downloads and/or interactions etc. Due to some committee changes, there is some history missing for early decision making and grant outcomes. Success rate has been difficult to determine through data only as revenue is not always a clear measure of success as the project may still be gaining market share requiring low fees, have less direct impact through ecosystem awareness/education or are tooling/docs which are hard to track impact due to unknown users. We have used data where practical and other more subjective measures to assess individual grants and categories as a whole against their impact vectors.
General Stats
| Total Applications | 535 |
|---|---|
| Total Grants Awarded | 63 |
| Total Funds Awarded | $1,448,300 |
| Average Grant Value | $25,370 |
2.0 Grants Projects Review
2.1 Grantee Statistics
Our most common grants were SDK and tooling (15) followed by custom pools (9) to develop the ecosystem for builders further and incentivize new pool implementations. With Balancer positioning itself as the tech layer for building AMMs, this is where our focus should be for maximum impact.
Custom pool ($46k) and managed pool ($49k) integrations were the most costly per grant due to the highest amount of work required and the potential impact on revenue/volume/TVL. (Note early research, quests and a metaverse grant were not proportionally highly funded with limited results. These have been excluded as one-off, bull market approvals by an early committee).
Lowest cost grants were public goods ($3k), community support ($3.2k) and marketing/content ($3.3k). These are all difficult to quantify for value to the ecosystem but have generally had high-quality deliverables produced making them efficient spending.
2.2 Measuring Grantee Impact
Determining the quality of completed grants is not always a straightforward, quantifiable process.
Xave Finance for example is a highly successful project in expanding the Balancer brand, showing capabilities of Balancer custom pool infrastructure and taking on-chain FX trading market share, yet Xave could be objectively classified as a low-return grant solely based on generated revenue to date. A number of grantees (both successful and underperforming) are discussed later on in this report, assessing why they did or did not have an impact.
This is a common challenge amongst many grant programs, and therefore grants have been assessed within this report by the committee in an unbiased, yet practical way considering the following potential impact vectors:
- Revenue, volume and TVL increase where possible
- Market share or brand awareness
- Views, downloads, repo forks vs cost
The highest incidents of successful grants have come from Analytics (67%), Community Support (100%), Documentation (67%) and Tooling / SDK (67% where results were a composite of passable and successful grants). These four grant categories cannot be measured as an objective ROI because their impact is indirect but makes the protocol more user/dev friendly and drives more adoption to find successful protocols. These are also generally much lower-cost grants vs custom pool development and integrations.
Custom pools and integrations have the most potential for revenue generation. That said, the grants program from inception has not been solely focused on revenue generation as the primary metric of success. As seen in the above diagram, 86% of these projects have completed their scope of work but did not have success in adoption after their grant was finalised. These are due to a number of factors that include insufficient visibility, no product market fit or project sunsetting due to lack of financing.
Low success has come from managed pools (discontinued product), metaverse, sponsorship, research and yield integrations, these are discussed in Section 4 and learnings drawn from each.
These are generally all subjective assessments. As such one of the biggest learnings is that clear value/impact definitions and tracking have not been well set up or recorded. Going forward, grants are to be approved with value assessment metrics from approval. They must include KPIs or measurable impact criteria to be agreed between the committee and grantee. This may be volume, TVL, revenue, views, downloads, impressions etc. Milestones are to be set up accordingly and data collection methods are in place.
3.0 Learnings
This section highlights lessons learnt from reviewing the Balancer Grants program since its inception.
Committee Processes
Currently working well
- Filtering noise from applications
- Facilitating grantees with internal and external resources
- Brought in a number of successful projects into Balancer
- Awarding directional funding to Balancer priorities
- Reclaiming funding from stale grantees
- Improving prudent grant assessment and funding
- Internally managing cost of committee to the DAO
- Managing any potential conflicts of interest well
- Consistent follow up and transparent updates
Potential for Improvement
- Setting up value based milestones and KPIs for projects to better measure program success
- Determine impact measurement (views, traffic, volume, TVL) and set milestones accordingly
- Create further incentives for project to work towards adoption
- Post grant visibility
- More visibility for tools hub
- Create portal for completed projects or add to tools hub
- Have grantee complete a comms plan / explainer for twitter to be published upon completion
- Traffic measurement for toolshub
- Creating and filling RFPs
- Run brainstorming sessions to add RFPs
- Actively seek out teams to complete them
- Publicize more through grants twitter and Discord
- Be more ruthless with long running grant teams missing deadlines
- Grants have been unsuccessful due to long durations missing product deadlines
- Set limits for grants to complete or risk losing funding
- Encourage some risk taking with approvals
- Set aside a portion of the grants budget for high risk / moonshot ideas to encourage somewhat unlikely projects to experiment
- Provide more direction to potential grantees
- Publish more specific criteria on what is deemed valuable
- Experiment with a segmented budget for different categories
4.0 Successful / Unsuccessful Grant Analysis
4.1 Stand out grants
| Why was it funded / what value was intended? | How does it provide value/how is it a success? | What led to this value/success? | What can be learnt from this for the committee/DAO? | What can be learnt from this for the future grantees? |
|---|---|---|---|---|
| Analytics is important for the transparency of a platform to ultimately gain users. Tooling allows for people to better understand the protocol and encourage use and building | Heavily trafficked and adds legitimacy to Balancer with a professional offering. | Talented creators/Balancer natives. Became the #1 analytics site for Balancer pools and DAO treasury stats. Accessible from the FE. | The team are dedicated members of the DAO with known expertise and skills. Having easy access from the FE surely assisted adoption | Strong knowledge of the protocol and its data layers is highly valuable. Producing deliverables that work well and are intuitive for users is important. |
| Why was it funded / what value was intended? | How does it provide value/how is it a success? | What led to this value/success? | What can be learnt from this for the committee/DAO? | What can be learnt from this for the future grantees? |
|---|---|---|---|---|
| New use case Balancer custom pool. FX trading is a major industry in TradFi, this brings it to Balancer to take a portion of the marketshare | Has successfully taken a large marketshare in FX trading for supported stable coins. Currently low revenue with fees set low. Shown how Balancer tech can be leveraged in a new way through custom pools | Highly skilled team with thorough GTM strategy and marketing. | Support building novel use cases. Look for teams with a strategy for building adoption. | Novel use case, high quality implementation and dedicated team to drive adoption. |
| Why was it funded / what value was intended? | How does it provide value/how is it a success? | What led to this value/success? | What can be learnt from this for the committee/DAO? | What can be learnt from this for the future grantees? |
|---|---|---|---|---|
| New use case for Balancer custom pool that provides unique utility | TWAMM is a feature that can be used by DAOs for large swaps over time to minimize fees and price impact. If highly adopted, it could make Balancer the home for these large treasury or whale swaps. Currently has returned very little but the value is in long term adoption. | Highly skilled team. Functionality that Balancer is considering adding. Targets high value transactions | Support building novel use cases. Find teams that are driven to find adoption. | New implementation that is not widely adopted with a potentially high value market. Basically a good idea with clever implementation. |
| Why was it funded / what value was intended? | How does it provide value/how is it a success? | What led to this value/success? | What can be learnt from this for the committee/DAO? | What can be learnt from this for the future grantees? |
|---|---|---|---|---|
| Increase boosted pool adoption with yield bearing assets. Boosted pools were a new product that Balancer was aiming to grow. | Having yield bearing assets provide revenue for the protocol. Through funding these grants, it resulted in 4,167 ETH from Notional alone and more pools are expected upon completion | Protocols were well established and already had a significant amount of funds to migrate. | Yield aggregators can have potential for adding value to the protocol, but only if there are major amounts of yield bearing assets to migrate to Balancer. There isn’t sufficient value to Balancer for funding projects wanting to farm yields with non-yield bearings assets except maybe to drive adoption of a new product. | For yield aggregators to be successful, there needs to be a clear value proposition for Balancer otherwise there is sufficient incentives for the project to integrate Balancer pools for the emissions involved. |
| Why was it funded / what value was intended? | How does it provide value/how is it a success? | What led to this value/success? | What can be learnt from this for the committee/DAO? | What can be learnt from this for the future grantees? |
|---|---|---|---|---|
| Add utility to Balancer SDK and ease of use for a revenue generating function. | Flash swaps are an integral feature of Balancer and provide revenue for the protocol. While this is extremely difficult to measure quantitatively the value it has brought, it is subjectively agreed to be valuable. | High adoption of flash swaps on Balancer | The grants budget should include an allowance for tooling and feature/utility additions despite being difficult to determine a monetary return. | There are other ways to promote an application’s value proposition other than revenue return alone. |
4.2 Under-performing Grants
Not all grants are going to succeed, it is the nature of these programs to fund some promising projects that don’t reach their intended value and some that retrospectively were poor choices, unlikely to provide value. Here, we revisit a selection of these grants and the learnings from them.
| Why was it funded / what value was intended? | Why did it fall short? | What could the committee/DAO have done to help it succeed? | What could the grantee have done differently? | Learnings |
|---|---|---|---|---|
| Early in grant program’s existence by different committee but assumption is: to open Balancer to a new market (Africa) and provide education with a relatively small investment. Application was in the midst of a bull market and funding amount small. | Potentially as a public good, this may have been a positive outcome for those attending. As value to the Balancer ecosystem, there was little potential for this to bring significant volume or users to Balancer. Ethereum gas fees were cost prohibitive for developing markets and layer 2s were not widely adopted. Chains like Polygon had potential but amount of money available was low. No oversight of what was being presented, general sponsorship only. | Have input into event content. Attend event to join discussions and promote Balancer tech (not feasible for Africa). Choose event with intended audience | Provide impact metrics such as attendees and some anon backgrounds. Share content for comment | As a public good, this may still make sense. Education is important for the adoption of DeFi. Balancer specifically: Sponsorships for events need to be considered against desired outcomes. Attracting builders, aggregators and/or users. |
| Why was it funded / what value was intended? | Why did it fall short? | What could the committee/DAO have done to help it succeed? | What could the grantee have done differently? | Learnings |
|---|---|---|---|---|
| DAO and community support was high for pool monitoring bots. Well known team and protocol | Information was not sufficiently filtered and bots were mostly noise. | Followed up to tune the bots for relevant data. | Setup initial bots with more filtering to what alerts were relevant. | Grants involving data curation and alerts need to have multiple milestones scoped to incentivise filtering out noise that makes the deliverables overwhelming and appear to lack value. |
| Why was it funded / what value was intended? | Why did it fall short? | What could the committee/DAO have done to help it succeed? | What could the grantee have done differently? | Learnings |
|---|---|---|---|---|
| Managed pools were a major focus for Balancer at the time and putting real life assets on chain has the potential for major value. | Managed pools were dropped from Balancer’s priority list. Major regulatory issues to be solved lead to very long development time. There may be some potential for this but the timeline is too great for our grants program. | Unsure. This can only be solved by those dealing with regulatory bodies which is not the DAO’s fight. | Unsure. This is a complex problem that no project has solved yet. | Grants involving projects that require major breakthroughs in regulations should be avoided until there is a clear path forward. Would require incredibly high returns possible for the protocol that make the risk worthwhile. Not a recommendation to fund. |
| Why was it funded / what value was intended? | Why did it fall short? | What could the committee/DAO have done to help it succeed? | What could the grantee have done differently? | Learnings |
|---|---|---|---|---|
| veBAL is a core product of Balancer’s ecosystem and governs the DAO. Making analytics to demystify and track all concepts related to this was deemed high value. The BD team at the time was very bullish on this dashboard and team. | The grant was approved with the understanding that it was to be delivered in a short timeframe to reach the intended audience. The grants committee approved this project even though they were not confident in the team’s ability to deliver with some pressure from members of the BD team and the DAO. Final deliverable did not address everything required and lacked hosting to get it in front of those that could have benefited from it. | Scoping the deliverables better and understanding final form. Trust committee processes to both estimate the work required and appoint a team that is capable of delivering. | The team underestimated the complexity involved and missed the deadline by a significant amount of time. The product required hosting which was not clear at the outset of the grant. | The committee was unsure of the team and dashboard’s ultimate value but listened to outside influences. There are times to trust the expertise of fellow DAO members but ultimately this should not have progressed. Scope deliverables and have a common understanding of their final form. |
| Why was it funded / what value was intended? | Why did it fall short? | What could the committee/DAO have done to help it succeed? | What could the grantee have done differently? | Learnings |
|---|---|---|---|---|
| AMMs were new tech and research into optimizing pools could have high impact. | Research team lost interest and got busy with other commitments (college). By the time first research results were received, tokenomics had shifted making grant obsolete. | More follow up for progress. Hard deadlines and revoke grant funding if not completed. | Maintain focus on grant deliverables. | More follow up for progress. Hard deadlines and revoke grant funding earlier if not completed where timely delivery is important… |
| Why was it funded / what value was intended? | Why did it fall short? | What could the committee/DAO have done to help it succeed? | What could the grantee have done differently? | Learnings |
|---|---|---|---|---|
| Interesting concept that had potential for major utility as a custom pool. | Project lost funding and then did not have a vehicle to launch the platform. Long development meant it would have also been superseded in a short time. | Committee and DAO cannot keep projects afloat. | Market downturn dried up funding. Faster development could have averted this. | Custom pools will not have 100% success or adoption but their potential value is worth funding to showcase Balancer tech and ideally become a core partner and provide utility and revenue. |
5.0 Recommendations and Discussion
5.1 Grant Category Funding
After an internal exercise to determine what categories should be explored to create valuable additions to the Balancer Protocol, the committee assessed the application types submitted to date and researched other potentials for value.
| Category | Fund | Why / Why not |
|---|---|---|
| Custom Pool Types | Yes | Custom pool types have the highest potential value to Balancer but are risky. These projects create new use cases and showcase Balancer technology. |
| Research | Yes | Research has been generally avoided after early failed proposals. Recommendation is to revisit funding research as optimizations or new use cases may prove valuable. Risky with low likelihood of payout but high potential payout. |
| Gaming | No | Gaming does not need grant funding to integrate AMMs. This is a category for chain level grants to incentivize building. Value to AMMs is not there yet. |
| NFT Projects | No | Balancer is not an NFT platform. |
| Event Sponsorship | No | Requires significant resources to make sponsoring events or hackathons worthwhile and they need a dedicated technical resource which is not available. General sponsorship is a marketing initiative and should be funded by the marketing SP to own. A grants specific presence is possible but at this stage not deemed worthwhile |
| Analytics | Yes | Continuously improving analytics and encouraging existing projects to include Balancer drives volume to the protocol. Clear value. |
| SocialFi | No | Does not require AMM integration funding. Low potential for value. |
| Yield Aggregators | Yes* | Only with a direct value calculation. There are generally sufficient incentives for yield aggregators. With no yield bearing assets, this is not worth funding. If the aggregator has the potential to bring high volume and TVL of yield bearing assets, then a value calculation can be made. |
| Education / Tooling | Yes | Very important to make Balancer more user/dev friendly and drive adoption of building and investing in the platform. |
| Swap Aggregators | Yes | Swap aggregators create more revenue streams. Strategic grants may be considered. |
| Marketing / Outreach | No | Marketing initiative and should be funded by the Marketing SP |
| Wrappers / Infrastructure | Yes | Can lower barriers to entry for other projects looking to integrate with Balancer and provide additional revenue streams |
| Public Goods | Yes | Less about direct value to Balancer, but DeFi as a whole. Set up a portion of funding set aside for these types of projects. |
5.2 Proposal Assessments and Approvals
- Include value assessment metrics from approval. All new grant approvals must include KPIs or measurable value criteria to be agreed between committee and grantee. This may be volume, TVL, revenue, views, downloads, impressions etc. Milestones are to be setup accordingly and data collection method in place.
- GTM strategies for new projects. Projects that have not launched or are low TVL must include GTM strategy for the grants team to assess with assistance from those with specific expertise. This is not a new strategy, but a reminder not to completely discount new projects.
- Grant expected durations and a buffer to be agreed. Research or grants that could be affected by discontinuation or evolution of products/governance decisions should be especially aware of this.
- If the regulatory path is unclear, avoid funding. Projects that require regulatory approvals should only be approved in extreme cases and have milestones and agreed deadlines setup to de-risk grants program and incentivize grantee.
5.3 Budget
- Experiment with directional budget. Set aside a small budget for public goods, research or moonshot projects that have an indeterminate chance of success but the potential to lift Balancer or DeFi generally.
- Do not fund hackathons or events until there are the technical resources in Balancer to support such an undertaking.
5.3 Visibility
Grant
- Agree on grant visibility plan with grantee pre-/post-completion - retweeting, medium articles, AMAs etc. Plan can be updated as it progresses.
- Make tools hub more visible
- Make completed grants hub more visible for people to find links/info. Currently exists only through grants Notion.
Grant Program
- Communicate RFPs through socials and Discord channel to increase visibility and adoption. Reach out to known teams to apply.