[BIP-19] Incentivize Core Pools & L2 Usage

Certainly all fair points. It would be very simple to switch from Hidden Hand to another platform. Up to veBAL to decide really. Hidden Hand has been a very good partner for us and to me 1% is a fair price to pay for now. It lets us begin this initiative much sooner than we could otherwise so we can observe if there is any value created from this or not.

I’m not against proposals from other marketplaces to be included or a dev team building a marketplace Balancer would own.

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We are in support of this proposal.

It is a great way to transition Balancer’s revenue stream whilst we have the time. Following some of the comments, we agree with solar that it is better to rely on Hidden Hand for now since it gets the process up and running now esp for such a small fee. Later we could consider swapping or building our own marketplace.

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As much as I agree on the benefits of having an exclusive market place, I don’t think the costs of kickstarting such an effort outweigh the benefits.
Thus, I’d side on partnering with starting with HH.

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Note that fees earned being used as bribes is after the DAO takes their 25% cut. If we collect 40 wstETH in fees, the DAO would get 10 and 30 would be used to bribe for the wstETH pool for example.

So in effect, swap fees to veBal holders will be reduced from 75% to 0, while the DAO still gets its full 25% cut…?

veBAL’s share remains at 75%, it is only the distribution method that is being changed.

Today protocol fees are earned by veBAL passively and everyone gets their proportional share. You can direct 50% of emissions to CREAM pool and still earn your 50% share of protocol fees, despite the fact that CREAM earns a very tiny share of the protocol’s total fees.

If this proposal passes, you are still free to vote 50% of emissions to CREAM (and I personally think you should be able to do that if you want). The difference is you will no longer earn your 50% share of protocol fees. A large portion of protocol fees will be distributed to veBAL voters as bribes on the pools that earned them (starting with the list in the OP) and over time this will grow until the end state where you will ONLY earn protocol fees based on what the pools you vote for generate in fees. There will eventually be no more passive protocol fee distribution.

This creates a strong financial incentive for voters to vote for pools that earn high fees. This will align voters with the interests of the protocol and we can prosper together. Compared to today when we are bleeding to death because 50% of emissions can go to CREAM and 50% of our protocol fees can be passively leeched.

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Hello everyone. Finally took the time to sit down and read all of these quality comments.
Personnally I’m very happy to see Balancer thrive with its newly adopted veBAL and even more to see that this is just the beginning as the model will offer plenty of solutions to optimize Balancer’s own strenghts.

I agree that offering access to a unified bribe marketplace for all veBAL wrappers is a great opportunity for Balancer, especially with this strategy in mind. I also agree the need to externalize it, not just to avoid dev cost, but because these markerplaces have real dev needs on a weekly basis.
However, it would be great to look at Balancer’s specificities. There currently are at least four veBAL wrappers (sdBAL, auraBAL, tetuBAL, pickleBAL and maybe why not cvxBAL) and multiple projects working on a bribe marketplace (Paladin included).
Giving exclusivity for one platform will create a situation where this specific platform will create the market rates, which is a huge advantage.

Now, I am not trying to pitch why Paladin’s Quest could be a better solution, but rather how do we enable a situation where Balancer benefits the most from this situation with minimal overhead. My guess is we could either

  • Do an automatic pro rata of bribes depending on each platform’s volume the previous week
  • Let veBAL holders allocate the contract on monthly basis (would force all of the bribe marketplaces to bribe holders every month or accumulate voting power)
  • Find another way to let the free market dictate bribe allocation.
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I’ll re-iterate that I am very open to competing bribing platforms making a proposal to be included in this initiative. Hidden Hand is simply the best option to get this off of the ground right now and I view this as a time sensitive proposal.

With the launch of Hidden Hand’s Aura marketplace I want to clarify how that changes the OP as we head into a likely vote next week. As discussions progressed it was decided the simplest technical implementation was to proceed with separate marketplaces in the short term. Eventually the goal is to have a “bribe optimizer” which will automatically allocate bribes across all Balancer related marketplaces proportional to voting power of each system. If/when this is available it will be the preferred method for allocating the core pool bribes.

In the interim I believe the best option is to proceed with bribing both the Aura & Balancer (native veBAL) marketplaces proportionally to the voting power of each system. In other words, a manual bribe optimizer effectively.

Example: veBAL’s share of fees from the wstETH/WETH pool is 30 wstETH. Aura holds 20% of veBAL according to Dune. Thus, 6 wstETH (in USDC) is allocated as a bribe for the wstETH/WETH pool on the Aura marketplace and 24 wstETH (in USDC) is allocated as a bribe on the Balancer marketplace.

Any competing system to Aura that gains 20% or more of veBAL supply and has an associated marketplace (HH or otherwise) would be eligible for automatic inclusion in this initiative (would not need a vote). If Aura or any competing system falls below 20% of veBAL supply they would no longer be eligible to receive core pool bribes.

Any marketplace other than Hidden Hand supporting veBAL or vlAURA would need to present a proposal to be eligible to receive core pool bribes.

The current plan is to put this proposal to the Governance council on June 30th and if the snapshot passes, the first core pool bribes would land on July 11th.

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Thank you @solarcurve for this proposal, we support it!

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Isn’t there effectively a doubling up of bribes with the introduction of this Aura bribe marketplace? Effectively doesn’t this mean that locked Aura voters earn bribes from there, then Aura earns bribes on top of that based on how it votes with its locked BAL? Or is Aura’s locked BAL excluded from earning / claiming bribes?

edit: as an aside, all these bribe marketplaces is going to get very confusing, especially if people voting with their locked BAL have to visit numerous places to check/claim their bribes each week.

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Aura’s veBAL cannot claim bribes on the “Balancer” Hidden Hand marketplace. Their contract is blacklisted by the HH team.

If you have veBAL, you only need to check the “Balancer” HH market. If you have vlAURA, you only need to check the “Aura” HH market.

I agree there are a lot of moving parts here and I hope an automated solution is not too far away. Once the wheels start turning I think users will quickly figure it all out though.

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Good to know with regards to Hidden Hand, was concerned that people who locked BAL were going to be effectively diluted by that effect, but so long as locked Aura isn’t effectively earning double bribes that’s fine.

I was referring to mentions of other bribe marketplaces being built to compete with Hidden Hand (as suggested by Figue above), incidentally, with regards to complexity for users.

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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.

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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.

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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.

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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:

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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.

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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?

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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).

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@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

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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.

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