[BIP-19] Incentivize Core Pools & L2 Usage

I realized I hadn’t yet commented on this proposal :nerd_face: I was definitely in the camp of wait and see what Aura does to gauge voting outcome for awhile until I thought a little more about this proposal actually represents.

I was first thinking that “core” pools should be geared towards pools that would regularly obtain the greatest volume/swap fees, this was the reason behind the liquidity mining voting power that existed at the beginning of veBAL. While that is still not a bad idea I think this strategy could prove to produce better returns overall. The genius here is due to the yield baring assets, as TVL grows the $ amount garnered rises as well. The same thing can’t always be said for swap fees because at some point there is diminishing returns (reason the boosted pools exist).

Not only does that allow the treasury to grow which can hopefully lead to great things due to re-investment into the protocol, but also those that vote on the pool are directly incentivized to keeping the TVL on platform. The rest of the veBAL holders may feel like they are losing out on a piece of the action, but they always have the option to vote for these pools as well, additionally there is enough to go around elsewhere, people just need to decide what is important to them.

2 Likes

What I am trying to understand, is where these fees are going now. The proposal sounds great as stated, but this bribe money is coming from somewhere isn’t it? Other than the 25% DAO fee, where does the other 75% go now? I think the answer I read in comments is that the yields on veBAL would go way down. What does this do to auraBAL for example?

To me evaluating this proposal is about thinking about where those fees are best allocated. Would allocating these fees from their current receiver lead to something becoming less competitive? Otherwise, the idea of taking some money out of the system to incentivize high value pools makes a lot of sense.

The other question I have is bribes vs buying. It seems like those same fees could be used to buy veBAL or AURA, and then those tokens could be used to vote for these pools. In the long-term, that seems more sustainable to me.

At best maybe there is some way to determine based on current conditions if it makes more sense to bribe or buy(and what to buy). This could enable some sort of a mixed approach.

2 Likes

Yes, fees that are currently going to veBAL passively would instead be used as bribes on core pools that generated them. This would cause the passive yield on veBAL to go way down and thus the yield on auraBAL, at least the portion that comes from protocol fees, to go way down.

As to your other point about using these fees to buy veBAL or vlAURA that would represent a bigger change - money being taken not just from passive veBAL but from mercenary veBAL (willing to vote for the highest bribe). It would effectively mean the DAO starts to have voting power in the gauges. It’s not necessarily a bad idea but to me it is outside the scope of this proposal. If the DAO ever does get involved in the gauge vote there are a lot of moving parts to be figured out.

1 Like

It looks like I am a bit late/this has already passed, but I’d have liked to see some sort of modelling of how that would change the proposition for veBAL HODLers, and maybe a bit more thinking about where these funds came from, who has the “right” to them, and how this change benefits those HODLers. How much of the veBAL return comes from fees on these yields. How much does that go down? Where we being too greedy in the first place? Why?

Maybe the issue is that the person who should have right isn’t getting it. Maybe you’re directing yields away from someone who in most lines of reason do have rights to it, but seeking to create benefit for them some other way.

Regardless, seems like a good first step for testing and learning :+1:

2 Likes

The heart of this proposal is ensuring that Balancer’s long term growth is protected. From a short term perspective this proposal is bad for Badger and Cream pool voters because these pools generate very little fees but take a large share of emissions. If this situation persists Balancer’s revenue will continue to decline which is a negative for Balancer’s long term growth.

However, by creating an incentive for voters to support pools that significantly contribute to Balancer’s revenue we align the interests of voters with the interests of the protocol. If a large amount of voters ignore this incentive it creates an opportunity for external players to buy & lock veBAL to take advantage of the money left on the table so to speak.

As I mentioned a few posts ago, this proposal will be passed to the Governance Council on June 30th to request approval for a vote. It is certainly not a done deal by any stretch.

One must recognize the simple realities here. Both Badger and Cream communities locked a lot of veBAL expecting to vote on the Badger and Cream gauges that governance approved. Balancer is now suffering because so much of our emissions are pointed at these two pools which simply cannot generate fees. This proposal is the perfect middle ground to solve this issue. Badger & Cream should be allowed to continue to direct all the emissions they can where ever they want but they should NOT be allowed to continue syphoning off protocol fees that they are not contributing to.

I believe all parties here are bullish on Balancer. Supporting this proposal is a great opportunity for the entire community to come together and recognize that the status quo cannot continue - compromises on both sides must be made so that we can all move forward together in harmony.

2 Likes

According to the past fee incomes, the income of stablecoins was lower than the emission of BAL, so I don’t think this will change the voting behavior of whales. This change is only Reduced the returns on his stablecoin segment. Voting for CREAM is still the behavior of maximizing his income. Is it right?

1 Like

Yes, he is earning far more from farming BAL emissions in the CREAM pool than he is earning from passive protocol fees. This change would not impact his voting behavior - the goal is to influence the voting behavior of mercenary voters and bring more mercenary voters into the system (people who decide their votes based on bribes).

2 Likes

@solarcurve I personally do not think giving a monopoly to a single vote incentive protocol like hidden hand is a good idea. Being a part of the BeethovenX core team, you very well know how effective KPI based bribes are. Unfortunately, Votehoven (Votium fork) has not been able to host any of the bribes and hidden hand wont be able to either. As anactive member of the beets community, now balancer on optimism aswell I would much rather have a solution like Covenant Protocol so veBAL holders can experience the same KPI based bribes that the beets community has enjoyed for the last 13 rounds

2 Likes

I support this proposal a lot less now, as it is being used as a reason why other projects/ideas should not be allowed to innovate and grow on Balancer/veBAL.

I fully support the idea, and I fully support trying many things with a new ecosystem/tokenomic structure.

The comments in the linked gauge governance however seems to present this as an overarching solution that excludes others. Therefore, I am opposed.

I would like to see this reframed in a way that is more data driven, and takes into account that other entities may also be trying to develop on top of veBAL. This governance should make that more possible not less.

2 Likes

Thinking further on this, I think the proposal adds too much complexity to a system already non-trivial to understand. I think we need to wait longer to see how all the various lockers etc being built on top of Balancer impact vote distribution.

A much better alternative I think for the short-mid term is that Balancer’s treasury locks some % of its BAL into veBAL and uses that to vote for core I suppose “public goods” pools each week. That way we don’t radically alter the system’s function before we’ve seen how all the moving parts interact outside of somewhere like Curve, where there are only really Stablepools.

4 Likes

I’m in favor of the core pools proposal. In a bear market, the priority of Balancer should be to earn as much capital as possible while minimizing dilution.

Farmers such as CREAM incentivize their LPs only to dump the farmer BAL on the community as well as use the LP for exit liquidity. In this model, as projects like CREAM continue to sell their token, the TVL of Balancer also falls. If veBAL is to retain value over its locking periods, it’s best to minimize the vulture capital.

Promoting healthy pools, with heavy trading fees, that earn yield-baring tokens for the DAO, is the ideal model for Balancer’s future. Having pools that are heavily traded also brings more users, brings LPs with less IL that people want to farm (boosts TVL), and earns more for the DAO, which is most important.

Redacted Cartel & Hidden Hand Marketplace have shown to be great partners and have consistently held all of their CRV/CVX even through the toughest markets. They have also proved they are willing to dedicate resources to building on top of protocols with Pirex (Liquid Wrappers & Auto Compounding) & Hidden Hand (Bribe Market & Delegation Platform). I think they are a great partner more innovation and users to the Balancer platform.

This proposal turns BAL into one of the best value accruing projects in DeFi.

2 Likes

https://snapshot.org/#/balancer.eth/proposal/0x28bd2c5580f5a8effacdceb0aec52e9bc63987fa4f4a39f8b8223257ca4376cc

1 Like

I think a challenge here is that it works well for re-enforcing rewards for existing pools which are doing well for the protocol, but makes it harder for newly added pools to reach that stage. The other thing is whether there are core pools which don’t generate as much in fees but are good to have for other reasons, like e.g. being able to route trades through the Balancer vault without having to go via other sources of liquidity elsewhere.

At the moment a major issue I can see is that we no longer have any liquidity really in pools which are important in swaps, so e.g. a common trade may be USD > [token], we have ETH > [token] liquidity but lack USD > ETH liquidity, limiting the usefulness of liquidity in the vault. It might be that it’s decided not to be important, but the entire previous system designed by governance and managed by the liquidity mining committee was built around that.

3 Likes

How long should we anticipate implementing this BIP would take? A couple days, weeks or months to go live post passing vote? Thanks

1 Like

if this passes the first bribes would land on July 11th, lining up with Aura’s voting cycle

2 Likes

No wBTC containing core pools on mainnet?

once the new pool factories are completed to allow for taking the protocol fee on yield bearing tokens I can see the creation of a core pool like wstETH/wbtc or wstETH/bbaUSD/wbtc

2 Likes

Did I read correctly new pool factories are not imminent though? Still at least 1-2 months out if everything goes according to plan? Not sure if I got that piece correct. Thx

1 Like

correct, that is the latest estimate I believe.

1 Like

Happy to see L2 usage included as part of these proposals!