[BIP-28] Kill CREAM/WETH Gauge

Motivation

Since the approval of the CREAM/WETH gauge back on May 24th Balancer has earned ~$12k in protocol fees while spending ~$1.55M worth of BAL emissions. The CREAM gauge is the largest recipient of BAL emissions while returning virtually zero fee revenue to the protocol. Long term mechanisms like the recently passed “core pools” proposal should help naturally correct this imbalance as market forces are given time to work though even in an optimistic scenario the CREAM gauge will remain very large for the foreseeable future.

Per recent discussion on the forum the community is split on this issue. Governance did approve the CREAM gauge in a legitimate vote and BAL was bought on the open market and locked in veBAL to vote for it. Governance also has the power to vote to kill any gauge for any reason and everyone participating in veBAL accepts these are the rules.

The Balancer ecosystem has significant funding requirements that currently far exceed our revenue generation based on the last 30 days. At this point in time the largest blocker to Balancer reaching sustainability is the existence of the CREAM gauge. There is enough support in the community for killing the gauge that it is appropriate to move this to a vote in my view - this proposal will be sent to the Governance Council for approval next Thursday, July 14th.

Specification

If approved, the DAO Multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will call grantRole on the Authorizer 0xA331D84eC860Bf466b4CdCcFb4aC09a1B43F3aE6 with the following arguments:

role: 0xec1d467d9ab03a0079c22a89037209f5763aec973897ea763e2cf25d71a5f12e
account: 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f

The role can be verified here. This will give the DAO Multisig the ability to call killGauge on a pool’s gauge.

The DAO Multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will then call killGauge on the CREAM/WETH Gauge 0x9F65d476DD77E24445A48b4FeCdeA81afAA63480

6 Likes

I’ll be voting in support as I see the emissions spent on this pool to be counter productive to the protocol’s long term growth.

8 Likes

Rather than killing this gauge can we vote to cap the amount of emissions that can go to any one gauge? The whale, while draining resources, did pay to be a part of the Balancer ecosystem and locked his bal for a year like the rest of us.

Even though their voting doesn’t go directly in line with the current plan I see no reason to completely kill the gauge - rather just cap emissions to 10%.

3 Likes

There is no way to cap emissions to a particular gauge without redeploying the entire system.

We could enforce some kind of social contract - say, if some kind of gauge (perhaps 80/20) reaches 10% of emissions every week for 4 weeks then we’d start a vote to kill it.

Not really convinced that approach is better than simply killing CREAM and moving on.

It is definitely a tricky conversation because as you mentioned the whale that locked their BAL acquired it over a period of time and is on one hand “just playing the game”, but on the other hand I think we must ask ourselves how long are we going to allow one actor to abuse the system for only their benefit. Also it isn’t like others are piling into the CREAM pool (not that there would be that much volume anyways)

To me it would be different if they were LPing in a pool where they could still control a large amount of the pool’s tokens, but at the same time provide benefit to the protocol itself (by bringing in volume). This pool is minting the majority of the weekly BAL, really for one entity, to the determent of all other holders and the protocol as a whole. To me that makes the investment proposition of BAL to others look poor which ultimately also means bad price. I have to believe the actors here would like price appreciation as they are locked in for a year. If they continue to suck the protocol dry we are going to potentially fall behind if the market rises at any point over the next year. *** NOTE: comments on price are purely speculation and my personal thoughts ***

1 Like

so what if after this is killed a new gauge pops up which gets a lot of votes, or a lot of votes move to some other gauge which doesnt earn “enough” fees?

if there is no clear definition of the parameters of what makes a gauge an “unwanted” gauge, what is the point of killing it or even what is then the point of making the creation of gauges permissionless?

i do not see reevaluating every gauge every couple of weeks as a sustainable solution.

4 Likes

I support this proposal as well.

A few people have argued against killing the gauge because the LP in the CREAM pool is “just playing the game as it was designed.”

But what is the actual goal of BAL incentives? It’s to bootstrap Balancer’s growth by attracting productive liquidity. That is the objective that serves the long-term interests of stakeholders [s/o to Vishesh for sharing this perspective].

So, in this case, are those interests being served? It’s very obvious that they’re not. Therefore, to me it’s very obvious that a change is needed.

In my view, killing the gauge is not the complete solution to this problem, but it provides an immediate stop to the bleeding while ideas for a more complete solution can be developed and discussed. I don’t think it’s necessary or justifiable to let the bleeding continue in order to make one swift move that elegantly solves the problem on a higher level.

4 Likes

At first, I was a bit more reluctant in regards to killing a gauge. However, I am in favor of killing this specific gauge because of the concerns that @SmallCapScience has raised in the general discussion thread

Certain entities are diluting BAL value (even for themselves) in a pool of a „unhealthy“ governance token. Therefore, we should protect our users and our protocol accordingly. That’s why we have this mechanism in place.
In hindsight, we need to be much more careful in which gauges we will approve / send to a vote.

Furthermore, the soon to be activated core pool mechanism should create a positive flywheel and I rather see the BAL wasted on CREAM distributed to useful liquidity.

2 Likes

Got it and any sort of “Kill after X amount of weeks” is also easily gameable. If it can’t be built into the system directly I guess this is the only way. I’ve only seen the whale comment on one post, I would hope they do here as well to state their case.

@TheOne - You could likely earn just as much BAL by holding other bluechip assets (bbaUSD, WBTC/WETH/USD, etc.) rather than only voting for a CREAM gauge, rather than just voting for a not nearly as traded asset. What are your thoughts?

2 Likes

I believe this proposal sets a precedent that could cause more harm than good as it removes the trustworthiness aspect from Balancer’s governance. How can someone, from now on, buy at market and lock for 1yr their tokens, when rules can change drastically depending on how we wake up in the morning?
The whale (or entity) in question followed the guidelines and bought BAL because it saw possibly an economic opportunity for the CREAM ecosystem and wanted to participate in the Balancer governance. We really don’t know what was the reasoning behind the decision. We are all assuming it was all intended to play the system but have zero evidence really.

We have proposed to so many projects to participate in the new veBAL product but the vast majority failed to see the potential. Why we want to punish someone that has understood and bet heavily on it is beyond me.

veBAL was designed and introduced to let Governance participants decide where emissions should go with minimal human interaction. That should be the end of the story.

I will vote against this proposal.

3 Likes

But what is the actual goal of BAL incentives? It’s to bootstrap Balancer’s growth by attracting productive liquidity. That is the objective that serves the long-term interests of stakeholders [s/o to Vishesh for sharing this perspective].

Jeremy, I tend to disagree here. “Incentives” is probably the wrong term to be used. BAL distribution has been set in motion to further decentralise Governance power. The BAL token is a governance token only, not an economic incentive. This is what Balancer documentations states:

Alignment between governance token holders and protocol stakeholders is crucial for successful decentralized governance, and BAL tokens are the vehicle to drive this alignment. BAL tokens are not an investment

Forcing away someone that wants participate in the governance process just because has different economic interests than others to me is a mistake.

3 Likes

It was never part of the ‘rules’ that a gauge, once approved would run in perpetuity. It is within the realm of governance’s power to kill a gauge.
Furthermore, the rules of governance aren’t being changed – any veBAL holder, new or old, can have a say on what pools should or should not have a gauge and how much emissions should be directed to them. This is not being changed.

This account is not being limited from participating in governance – that’s just incorrect. In fact, it’s expected that they’d participate in this vote and represent their own interest.

I’m not sure why intentions should be the deciding factor here and not the outcome.

veBAL isn’t a product and doesn’t function in vacuum. It’s a mechanism in service of the growth of the greater platform.

We are not punishing and we’re not doing it on personal basis. The governance is going to decide what’s best for the protocol as a whole, not a single actor within the system.

This is correct, that’s one of the functions of veBAL and it applies to this very vote – veBAL holders will be deciding where the emissions should be going.

5 Likes

I think SmallCapScientist brought up a great point here.
Regardless of discussion around income from trading, governance should reflect on the implications of a gauge and its uses. Otherwise, if we’re suspending critical analysis, we might as well just create a gauge for anything and everything.

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100% right. I could have used a better term there. The fact remains that only a few projects saw that opportunity.

That is correct. We’ve been told so many times we don’t need gatekeepers (remember GovCouncil?) but now we are back at square one because we don’t like the rules we approved anymore.
We had a LM Committee which distributed BAL tokens based on several factors, including what now we call “core pools”. Then we said oh the system can be corrupted or “BAL ToKen NeEds MoRe uSe cAsEs” so we introduced veBAL. Consequently some went out and bought those tokens. And now we are like, “oh yes but you cant vote like that man…”

What is done is done and we should accept it. We can change rules for the future and attract more projects to buy veBAL so to dilute further voting power concentrations, but not going against those that actually accepted the risk and bought BALs.

4 Likes

Has anyone spoken to @TheOne? It seems to me like this is a move to remove a gauge from one of the biggest veBAL HODLers, who is now locked in, and the DAO should be seeking to at least in part represent.

I have seen no evidence of any attempts to talk this through. To consider what both parties need. To think together about how to work together to build both a sustainable ecosystem and a decent ROI for large investors.

I DO NOT support 30% of veBAL going to the CREAM pool, or the BADGER pool, or any pool. For veBAL to be healthy yields must be well distributed.

That being said, this veBAL is locked, these votes will go somewhere. Why the game of cat and mouse with an entity who has identified themselves and seems willing to talk?

I think @Absolute_Unit stated that perhaps there should be some cap on pools, which I don’t think is possible in veBAL. Maybe it makes sense to think about what you would put in place if you could, and then approach @TheOne and see if they can find a way to play within those rules and start working together with Balancer Governance to bring this thing forward?

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I love the idea of talking to @TheOne and exploring any other options.
@Tritium, if yourself, @TheOne or anyone else has any alternatives in mind, please bring it up – I think everyone would be happy to discuss in good faith.

This account, or any other account is well represented within the governance system by the virtue of their stake. I’m not sure what you’re actually suggesting here.


I want to address another point that’s been brought up in many posts under the context of playing ‘wack-a-mole’ with gauges.
In principal, there is absolutely nothing wrong experimenting with enabling and disabling gauges to see their impact on the protocol’s success metrics.
The concern about the overhead of these enablements/disablements is indeed valid. Although, we could very easily weight the overhead of a disablement with the amount the protocol is spending each week to keep it enabled.
Perhaps a more sustainable approach to mitigate this overhead is for governance to be more selective with enabling new gauges.

6 Likes

In order to bring some type of “social control” to this decision making process I wanted to share the following idea for people to poke holes into and think about.

  • I scrapped the following data from multiple Dune reports for the past 14 days (a larger time window can be considered but I had to scrap all this manually :sweat_smile:)
  • I looked at the average volume for each mainnet pool that has a gauge (includes pools with >= 0.25% gauge vote)
  • I took the v2 protocol level average volume for the same time period
  • I brought in the current voting weight (this could maybe be averaged too)

They key field is the % of volume per vote field. Basically if this field is 100% that means the pool’s average volume is the same as the % of gauge vote the pool is getting.

My potential system is this:

  • % of Gauge voting is >= 5% is eligible for scrutiny
  • % of volume per vote should be >= 5%
  • give new gauges an 8 week grace period before checks go into place; after these levels have been breach there is warning posted to the forum and possibly discord 2 weeks before the gauge is killed

My thinking is that this system keeps pools on level terms since only the Balancer ecosystem is evaluated. If the protocol volume goes down as a whole pools could either go down with it, up vs the trend, or stay static. This system says as votes go up, your volume should follow. I thought about bringing in volume for each pool’s tokens across all DEXs to look at market share, but not sure that actually matters.

let’s look at the current in-scope subset to pick apart each example at these current voting levels

  • CREAM - would need 750k volume on average to remain. There have been zero days where the pool has received this much volume or more
  • Badger - would need 120k volume on average to remain. There have been 18 days where the pool has received this much volume or more
  • STETH - would need 525k volume to remain. There have been 5 days where the pool has received less than this volume in the same time period as CREAM/Badger
  • AAVE Boosted - would have to plummet to 150K volume on average. If this were to happen we have bigger issues
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I agree with this. Pools that are not paying their fair share should be limited to some precentage of the vote and 5% per pool sounds reasonable to me.

I also agree that while the system does not allow a hard stop, a social evaluation process is a good idea. I think it’s also important to give voters a month or so to respond before killing a gauge. With the 10 day balancer lock on revoting and Aura’s biweekly cadence, it takes that long for people to understand and adjust.

It’s great to see this thinking. Just now we were talking about how to vote, and I said that I though in the mid to long-term, we should limit our voting on the BADGER/WBTC 80/20 pool to 3-5 percent of AURA vote, so it feels right.

With that being said, Badger for example is gaining a lot of votes and we need to be able to vote for stuff. We need to be able to get some gauges up that make sense for us to vote for, or there needs to be a more efficient bribe market for us to have revenues and survive.

It doesn’t make sense to pay for bribes and/or own all this AURA that we bought on the market to build in an ecosystem just to not be able to use it. So I think with a rule like this in mind, it’s also important to allow new gauges to be staged and to allow for innovation. To not leave entities like BadgerDAO and @TheOne who have invested money and/or time in this space with a big bag of votes and nothing to really do with them.

I really like where this is going.

I also think the Factory 2 will change a lot. We’re really trying to hold off on launching graviAURA pools or doing a lot more governance until we can use them and generate more value for balancer. At the same time, we need more things to vote for, or a more efficient market for our votes.

2 Likes

Simply that it seems odd that I do not see more conversation going on between concerned parties in these governance proposals.

I was trying to imply nothing more or less. I agree, the vote is the vote, and if the DAO votes to do something it shall be done. I do think it’s important to be careful and think about how the majority wields its power and where that leads.

1 Like

Alternatively you could look at revenues rather than volume. I’ve taken into account yield revenue for pool types like wstETH. Below looks at total revenues for the same 14 day period as the volume based approach.

You can see from this view that CREAM and Badger are still the outliers (bit of a wider view than >=5% % gauge votes). I left the boosted AAVE pool out of this review since that pool isn’t necessarily about revenue, it is a core stable pool that supports swaps across the protocol.

I am not 100% sure what to set the threshold at for % of Revenue per vote, but my initial thinking was 50%. Basically saying if a pool’s % of total revenue is at least 50% of the gauge votes it controls it’s good. That would mean that CREAM would need to create revenues of roughly $70k for a two week period. For Badger it would be around $11k-$12k.

As mentioned above both of these systems are food for thought and can be tweaked, but a systematic approach could help guide things in a better direction. I don’t think anyone wants to stifle innovation, but I do think we need to recognize when something is broken for the community as a whole. It is great that individuals and teams want to acquire loads of voting power to be able to direct emissions in their direction, however when they tip the scale so much that they hurt the whole ecosystem that doesn’t seem right. For that reason I believe there is a point where a gauge receiving a certain amount of votes should be held to a different standard.

I still believe large accounts, if they are in it for the long run, are better off giving some of their voting power to pools that could generate more revenue. I don’t see the point of cornering the market and acquiring a huge stack of BAL if you’ve made an environment nobody wants to buy into. Maybe being a bit dramatic, but that is still how I view it.

6 Likes