[BIP-146] Incentivize 8020 BPT Staking (ve8020)

Introduction

One of the biggest changes Balancer made to veCRV when we released veBAL was the use of BAL/WETH 80/20 BPT as the locking token instead of BAL. This has allowed BAL to have extremely deep on-chain liquidity relative to our circulating market cap, all without having to spend costly emissions on BAL liquidity incentives. Encouraging the adoption of similar ve8020 systems across DeFi is a key strategic objective for the ecosystem. This kind of locked liquidity is far more sticky than usual TVL earned from liquidity mining, plus Balancer’s emissions will not be the primary driving force behind users choosing to participate as the project itself will contribute their own emissions, revenue sharing, gauge voting, or similar mechanisms.

While the benefits of adopting ve8020 are numerous it remains a relatively novel concept that most users are not familiar with. It will require additional dev work from projects looking to adopt this compared to single token locking. Thus I propose that the Balancer ecosystem starts a new program for incentivizing ve8020 adoption which will outline BAL grants for projects which meet certain TVL and revenue milestones. Each project must be approved by a Balancer governance vote to participate.

Program Outline

This program is intended to support all systems which involve the staking/locking of 8020 BPT. ve8020 is one such system and it’s a convenient shorthand to use, but this program is not limited to “ve” systems only.

I suggest leaving the qualifications for participating as soft requirements since it’s difficult to account for every possible future situation. We must carefully balance spending BAL to drive ve8020 adoption in a bear market with vaporware projects adopting it just to get paid.

Some factors Balancer governance should assess for projects adopting ve8020:

  • Project track record - has it been around awhile, is it likely to exist going forward, does it have an active community/user base, etc.
  • Circulating market cap and trading activity - is there a reasonable likelihood for this ve8020 to contribute significant protocol revenue for Balancer?
  • BAL incentives should go to ve8020 lockers only, and the lock should have a minimum duration of 16 weeks

It will be up to each project to make the case to Balancer for why they should qualify. Balancer is looking for ve8020’s that not only drive high TVL but also drive protocol revenue.

All BAL granted through this program must be locked in veBAL and ideally the project will provide the necessary 20% of ETH so that no BAL is sold.

Proposed Milestones

Upon a successful Balancer governance vote for a project to join this program they would immediately be eligible for a grant of 25k BAL.

The intention is to make this program accessible to most projects with the goal of Balancer benefitting from their future growth since they’re parking locked liquidity with us. The first two milestones accomplish this while the final two milestones serve to entice larger projects to adopt this standard. If all milestones are met a project stands to gain 250,000 BAL!

Please note that only TVL and revenue from locked liquidity will be counted towards the milestones.

In order to future proof this program against changes in market conditions the milestones are given in relation to the price of BAL.

  • 25k BAL
    • TVL exceeds value of 25k BAL by 30x
    • Lifetime total revenue earned exceeds ⅓ the value of 25k BAL
  • 50K BAL
    • TVL exceeds value of 50k BAL by 30x
    • Lifetime total revenue earned exceeds the value of 50k BAL
  • 50k BAL
    • TVL exceeds value of 50k BAL by 100x
    • Lifetime total revenue earned exceeds the value of 50k BAL by 4x
  • 100k BAL
    • TVL exceeds value of 100k BAL by 200x
    • Lifetime total revenue earned exceeds the value of 100k BAL by 4x

Using today’s price of $5.50 BAL, these milestones would be the following:

  • 25k BAL
    • TVL exceeds $4.125M
    • Lifetime total revenue earned exceeds $45.8k
  • 50k BAL
    • TVL exceeds $8.25M
    • Lifetime total revenue earned exceeds $275k
  • 50k BAL
    • TVL exceeds $27.5M
    • Lifetime total revenue earned exceeds $1.1M
  • 100k BAL
    • TVL exceeds $110M
    • Lifetime total revenue earned exceeds $2.2M

As a final note, I believe it is prudent to include that once a year passes from the approval of a project’s vote to be included they must present another proposal to remain in the program for another year. Failure to do so would make them ineligible for any future milestone distributions.

Specification

If approved, governance will soon see applications from projects interested in this program. No immediate action is required. The goal is to establish a clear, unbiased incentives program that is easy to understand and massively scale ve8020 adoption in 2023.

13 Likes

Great to see a structured program to get people to integrate 80/20! The rewards aren’t considerably high but I think a lot of projects will consider it a cherry on top for adopting this system.

5 Likes

I like the balance of how this proposal is set up: on the one hand it incentivices the usage of our 80/20 pools and on the other hand focuses on remaining the liquidity inside the system. Only downside for veBAL holders is the potential dilution this entails.

Are protocols allowed to vote for their pools with their veBAL? I guess that’s one of the selling points, right? Might actually be nice to have a self-boosting stack on top of potential bribing.

All in all this is proposal has potential to generate nice fees for Balancer.

In full support.

2 Likes

Great proposal and very interesting. Would love to see more widespread adoption of the 80/20 model, along with some education and outreach efforts. I think we are all familiar with how difficult it can be to explain the 80/20 liquidity concept to folks who are otherwise not familiar with weighted pools.

One question -

This program is intended to support all systems which involve the staking/locking of 8020 BPT. ve8020 is one such system and it’s a convenient shorthand to use, but this program is not limited to “ve” systems only.

What exactly does “staking/locking” mean here? Does it require staking + locking? One or the other? Or are we leaving it intentionally open-ended subject to further governance in the future? I assume the latter but figured it would be worthwhile to clarify because Im a little confused on the issue after rereading the proposal.

I’m mainly asking because as this space continues to evolve and methods for attracting sticky liquidity evolve beyond just locking tokens, I would hate to see this program get locked into a rigid staking + locking mindset.

*Edit - just reread the part of the proposal about “soft requirements.” This makes sense. Guess I should have read this a 3rd time before posting.

*Edit x2 - Confused again by the 3rd soft requirement bullet.

BAL incentives should go to ve8020 lockers only, and the lock should have a minimum duration of 16 weeks

So, in the 4th read, back the beginning and the original question stands. And of course I’m curious to hear everyone’s thoughts on this.

1 Like

We only want BAL emissions going to locked liquidity. Some places might call that staking, tho I can see using both of those terms (staking and locking) can also be confusing.

If you open this up to include systems where BAL emissions go to unlocked liquidity there’s little reason to have this program imo, since you’re now competing with basically every pool we have earning emissions. The key here is getting a lot of locked liquidity on Balancer that is predominantly paid for by other mechanisms besides BAL emissions. Getting BAL emissions isn’t the primary selling point of ve8020 but it certainly doesn’t hurt.

The bear market is actually the perfect environment to roll a program like this out, since projects are looking for any edge they can get. This is the time to align as many projects with Balancer as we possibly can.

2 Likes

Self boosting on top of bribing doesn’t really make a lot of sense. You are just paying yourself to vote for your pool.
Imho it would be smarter for them to either just self boost one pool without bribing or figure out a 2 pool setup where you bribe one an vote for the other.

But I really like the proposal, curious to see which setup people think up to make as much use of it as possible.

1 Like

That was actually what I was implying. One has two options and it would make most sense as you described.
In any case the setup is beneficial to both the DAO and the grantee.

2 Likes

I’m thinking generally of some separate mechanism, like a Reliquary NFT, that has scaling rewards… or something along those lines that incentivizes folks in an increasing proportion to the amount of time they’ve had the position (or some similar mechanism - doesn’t necessarily have to be time-in that scales; nor does it have to be reflected by an NFT).

1 Like

I think a system like Reliquary would definitely qualify. good point that there might be some mechanisms out there beyond hard locking that accomplish a similar thing. hence why we remain fairly flexible in the requirements for participation :slight_smile:

1 Like

https://snapshot.org/#/balancer.eth/proposal/0x3708b9fcb085bccc6ebb9e9708c6e45528a85b22483da9bbdcc0b606103429fb

Fantastic proposal! We’ve got a great primitive with ve8020, and a ton of projects stand to benefit from it. Some modest incentives can go a long way in driving adoption.

3 Likes

This proposal makes a lot of sense as it will grow the number of DAOs with a vested interest in Balancer.
Looking forward to see the list grow!

4 Likes

We already voted yes but documenting my thoughts here.

This creates a win-win situation for Balancer and those who align their interests with Balancer. With such a large amount of BAL up for grabs, it should be able to attract and retain these protocols. Its essential that this information is accessible to anyone so they understand that this exists; once passed it would be great to get a large outreach via marketing.

1 Like

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