Hello everyone!
In my capacity as a Music Director at Beets (formerly Beethoven X), I am submitting the following BIP related to the deployment of Balancer v3 on OP Mainnet:
BIP-XXX: Deploy Balancer v3 on OP Mainnet, managed by Beets
Introduction
This proposal seeks community endorsement for deploying Balancer v3 on OP Mainnet. OP Mainnet is a Layer 2 optimistic rollup scaling solution for Ethereum, designed to provide highly efficient transactions while inheriting the security of Ethereum Mainnet. With over $600m locked in DeFi, it is the fourth-largest roll-up solution by TVL. Committed to decentralization and open-source development, Optimism aims to build an internet that benefits all and is owned by all.
Continuation of Joint Balancer / Beets Deployment on OP Mainnet with Balancer v3
With an infrastructure designed to streamline custom AMM development and provide users and DAOs with a continuously expanding tech stack, Balancer v3 is a cornerstone technology for any ecosystem. One standout product driving adoption is the newly optimized 100% Boosted Pools, which have gained instant traction among multiple DAOs. With established lending markets like Aave on Optimism and protocols already familiar with v2, deploying v3 on Optimism is a logical next step.
Following the successful deployment of Balancer v2 on OP Mainnet, which Beets operated, the v3 deployment would also be managed by Beets. This new deployment builds on the strong collaboration between the Balancer and Beets DAOs, further strengthening their partnership and delivering mutual benefits to both ecosystems.
The main highlights of the Optimism deployment are the successful applications and management of the Phase 1 grant and the LST/LRT grant. Phase 1 grant distribution is still on-going, with approximately 218k OP tokens left to be distributed from the total 500k tokens. The last update for the grant can be seen here. The LST/LRT grant concluded with all the milestones successfully completed, the final update is available as a comment under the grant application.
There’s definitely also been challenges. The boosted pools were a major part of the strategy and initial success of the deployment. Through the boosted pools incident in August 2023 there was a significant loss of TVL and revenue. This also slowed down the usage of Phase 1 grant, since the distribution was set to be matched 1:1 with revenue. The latest grant application for increasing yield-bearing asset liquidity was also effectively shut down even though it received the highest preliminary score out of all the applications. While it was not explicitly stated, during the discussion the main reason brought out was the unconcluded Phase 1 grant.
Path Forward for Increasing TVL and Revenue
The plan forward has already been devised. With the approval of this proposal, Balancer v3 would be deployed on Optimism, which enables relaunching the boosted pools. Through discussion with the Optimism grant council we have been given assurance to post a proposal for repurposement of the currently undistributed Phase 1 grant funds. The repurposement proposal awaits for the successful vote of this proposal, with the main idea to support bootstrapping 100% boosted pools and incentivizing YBA liquidity on the v3 deployment in general. This is set to guarantee the successful launch of the v3 on Optimism and also enables applying for future Optimism grants.
Optimism Deployment Fee Adjustment
In addition to the deployment of Balancer v3, this proposal also seeks to align with the updated Balancer fee model outlined in BIP-734. Additionally, Optimism deployment would adopt the same Core Pool Framework as described in the updated Balancer fee model.
The most notable change is reducing Yield-Bearing fees from 50% to 10%. This adjustment aims to incentivize DAOs already utilizing v2 to transition to Boosted Pools on v3, while also appealing to protocols outside the Balancer ecosystem that were previously deterred by the 50% fee. By offering a pool type that provides additional rewards to users and enhances liquidity in two of DeFi’s most vital markets—DEXs and Lending Protocols—this change firmly positions Beets/Balancer as the leading destination for Yield-Bearing liquidity on Optimism.
This proposal proposes the following fee structure for the joint Optimism deployment:
New v3 deployment:
- Protocol fees: 10% on yield-bearing asset yields, 50% on swaps.
- Core pool fee distribution: 70% voting incentives, 15% Beets, 15% Balancer (6.25% veBAL, 8.75% DAO).
- Non-core pool fee distribution: 50% Beets, 50% Balancer (41.25% veBAL, 8.75% DAO).
Existing v2 deployment:
- Protocol fees: 50% on yield-bearing asset yields, 50% on swaps.
- Core pool fee distribution: 70% voting incentives, 15% Beets, 15% Balancer (6.25% veBAL, 8.75% DAO).
- Non-core pool fee distribution: 50% Beets, 50% Balancer (41.25% veBAL, 8.75% DAO).
Revenue going to Beets is decided based on Beets Quarterly Budget system, but Beets will adhere to continue using at least 50% of the revenue it gets from the Optimism joint deployment for veBAL/vlAURA acquisition (pending Beets governance). This will ensure a significant part of Beets revenue will be used to continue empowering the Optimism deployment, by example Beets has been using a significant portion of its vlAURA voting power to drive emissions to USDC/USDC.e/USDT/DAI pool on Optimism without voting incentives.
Motivation
- Deploying Balancer v3 on Optimism as Core Infrastructure:
Deploying Balancer v3 on Optimism places it at the heart of one of the most dynamic and rapidly growing ecosystems in DeFi. This deployment strengthens Balancer’s position on OP Mainnet while solidifying its role as a foundational protocol for liquidity and automated market-making within the Superchain ecosystem. - Establishing Balancer as the Yield-Bearing Hub on Optimism:
With the introduction of Balancer v3, the protocol is poised to become the premier destination for Yield-Bearing liquidity on Optimism. Balancer’s unique features will drive competitive yields for LPs while ensuring reliable pricing for assets. This strategic positioning will attract both existing DAOs and new protocols, establishing Balancer as the go-to platform for yield-bearing liquidity. - Continuation of Mutual Benefits for Joint Balancer / Beets Deployment:
The successful joint Balancer / Beets deployment of Balancer v2 on Optimism has delivered mutual benefits. The launch of v3, with the updated protocol revenue model, is expected to continue driving increased attention, TVL, and fees for both ecosystems. - Bootstrapping Supported by Existing OP Grant:
Approximately 220k OP tokens remain from the OP Phase 1 grant, which will be repurposed to help bootstrap liquidity for Balancer v3 deployment.
Specification
This proposal asks the Balancer community to authorize the deployment of Balancer v3 on OP Mainnet. In addition, a new protocol revenue structure would be adopted based on the updated Balancer fee model. Deployment is expected to start once the proposal has been approved.
Conclusion
Deploying Balancer v3 on Optimism and updating the protocol revenue structure represents a strategic opportunity to enhance both ecosystems by driving liquidity, user activity, and innovation. Approval of this proposal will facilitate the integration of Balancer v3 on OP Mainnet and adoption of the new fee model.