[BIP-812] Establishing the Balancer Alliance Program

Co-Authors: Zen Dragon & Lipman with the support of the Balancer Maxis
Fee Processing & Automation Owners: Xeonus and Gosuto

Summary & Motivation

This proposal aims to align key partners in the Balancer ecosystem with the tokenomic model of veBAL. By doing so, liquidity providers and partners equally benefit by their liquidity in Balancer pools and prioritizing Balancer over competing DEXs. In short, the way to further align all parties leveraging the Balancer DEX is to share a portion of the revenue generated by their pools with them; in the form of USDC to be converted to veBAL.

In doing so, partners such as Aave, Lido, and Rocketpool will be actively building a veBAL position to incentivize their pools long term, while collecting passive income on their position. This mechanism not only acts as a pseudo-buy back of BAL in the form of the 8020 pool tokens, but it also incentivizes and exposes partners to participate in veBAL further. Thus maintaining their relationship and usage with Balancer not only for the cutting edge features on Balancer V3, and historic depth on V2, but because they receive economic benefits for doing so.

Based on BIP-734, the split of the 50% protocol fee on swaps and 10% protocol fee on yields would act as follows under this new arrangement:

For core pools (wstETH/wETH or rETH/wETH for example), of all fees collected:

  • 12.5% continues to flows passively to veBAL holders
  • 52.5% (instead of 70%) of revenue would be recycled as bribes
  • 17.5% is directed to the multisig designated by a partner protocol in the form of USDC to be converted to veBAL
  • 17.5% is sent to the Balancer DAO

For non-core pools (80AAVE/20wstETH for example) of all fees collected:

  • 65% (instead of 82.5%) of revenue flows to veBAL holders as passive income
  • 17.5% is directed to the multisig designated by a partner protocol in the form of USDC to be converted to veBAL
  • 17.5% is sent to the Balancer DAO

In the sections below details regarding qualifications, the automation process, monitoring, and time commitments are outlined to define in greater detail the proposed rules of this program.

Execution Specification

In order to execute this proposal, the fee processing logic built for Balancer V2 and Balancer V3 must be modified to redirect the proposed portion of fees defined above to the addresses presented by each qualifying partner protocol. The V2 portion, due to being built for over a year, is far more configurable and trusted, making the phase one roll out of this program possible for V2 within 4 weeks of this proposal passing. To respect the framework laid out by BIP-734, this proposal will only go live after the first enactment of a Balancer Alliance member is passed by governance. In turn the non-core to core recycling portion of Balancer V2 would end as stated in the mentioned enhancement proposal. Balancer V3 core pool recycling would still potentially not occur for 1-2 more rounds, making the rollout of both fee model formats occur progressively.

The estimated lead time upon passing this proposal is after 2 epochs of successful fee processing for Balance V3 before the first Balancer Alliance fee processing round to occur. During this time period qualifying protocols would be invited to propose becoming Alliance members on the forum based on their history on Balancer. These proposals will be considered primarily in terms of time weighted TVL and revenue generating benchmarks, coupled with an outlined incentive structure from the corresponding partner to justify the flagging of new or existing pools to be deemed as eligible for revenue sharing.

Qualification

Partners that have generated $1M or more in lifetime protocol fees are deemed (‘Eligible Partners’). We believe these protocols have historically contributed a meaningful positive impact to Balancer and should automatically qualify for this program as a result. The following protocols would meet this criteria per this query:

Top Performers

  • AAVE
  • Lido
  • Rocketpool
  • Radiant
  • Renzo

Potential Alliance Members

  • EtherFi
  • Gnosis
  • Others if a compelling proposal is made to the DAO

How it works

There are two categories of Eligible Partners:

  1. Eligible Partners with individual pool(s) that generated >$1m in lifetime protocol fees (‘E1 Partners’)

  2. Eligible Partners without individual pool(s) that have generated >$1m in protocol fees - but the sum of lifetime protocol fees across all pools is >$1m (‘E2 Partners’)

E1 Partners would automatically receive the 17.5% fee sharing on the existing pools that have generated >$1M in lifetime protocol fees (‘Grandfathered Pool’). E1 Partners would also be eligible to receive the 17.5% on future pools if additional certain criteria are met (more below).

Grandfathered Pools include:

  • Aave-wstETH
  • wstETH-wETH
  • rETH-wETH
  • ezETH-wETH
  • RDNT-wETH

E2 Partners would not automatically earn the 17.5% fee share on any existing pools. They can earn 17.5% on existing or future pools if certain criteria is met (more below).

Criteria to earn Fee Share

For clarity, this section excludes Grandfathered Pools.

The following criteria must be met in order to receive the 17.5% fee:

  • Must be an Eligible Partner
  • Pools must be a core pool
  • Pools can only have Balancer protocol fees associated with it (e.g. cannot be a Gyro pool, etc.)
  • Eligible Partner must bribe an amount on Aura for the pool in order to maintain alignment between ecosystem participants. This results in Aura holders maintaining at least status quo (likely better) even with the fee sharing.
    • At a minimum partner pools must target a $5M TVL and utilize 1,000 USD worth of incentives per week to bootstrap pools from 0 to this point. Only at the point of hitting $5M in TVL is a pool eligible for the fees to be redirected towards accumulating veBAL for the partner.
    • The recommended incentive structure for partners would vary depending on the token, network, and various other factors. The suggested incentive format would entail a 3 month program at a minimum, however larger packages over a short period of time should also be considered by the DAO.
      • This point is only a recommendation, ultimately the DAO determines which partners proposal do or do not qualify for this program.
  • Must continue to permalock their veBAL

If an Eligible Partner stops meeting these criteria, then the 17.5% fee sharing will terminate.

Automation and Processing

Upon the confirmation of a Balancer Alliance member’s proposal to join the program, a flag will be set in the fee processing automation for the pools included in their respective proposal. This flag will indicate the pool is actively claimed by a partner, and indicate the address in which the USDC tokens should be sent. Depending upon if the pool is on Balancer V2 or V3, the fee processing automation repo will be adjusted respectively. All funds are processed on L2s and Mainnet will be converted to USDC, consolidated to the mainnet fee processing multisig, and the respective portion of USDC will be sent to the partner multisig, which will purchase 8020 BPT, lock the tokens, and manage the position accordingly.

If the partner fails to continue to relock the veBAL position, and or does not deliver on their agreed-upon incentive package the flag can be terminated at the discretion of the Balancer Maxis without a DAO via a governance vote. If desired, any community member is capable of putting up a proposal to end a partner’s alliance program eligibility for the DAO to vote upon.

Monitoring and Regulation

The Balancer Maxis, the operations and business development arm of the DAO, will take responsibility for monitoring the behavior of each Balancer Alliance member in terms of their veBAL locking activity and delivering on their incentive strategies to each respective pool. This will be done manually via on chain spot checks given the likelihood of only 3-5 participants in the near term. If the program does expand greatly, automation will be considered as needed.

To regulate gamification or abuse of the program, partner mutlisigs will be monitored to confirm locking of freshly acquired pool tokens occurs on at least a monthly basis. The Maxis will issue a notification to respective partners if the deadline is missed. The Maxis reserve the right, without a governance proposal, to terminate the fee sharing agreement if a lock is not executed for a 8 week period. A similar precedent will be held for the incentive commitments in the partner proposals, if an incentive program is not delivered upon for 2 weeks, a notification will be sent to the partner, with a proposal to pause revenue sharing being vindicated after 4 weeks.

Lido Case Study

Using Lido’s wstETH-wETH mainnet pool as an example, Lido would have earned roughly $120k worth of veBAL over the last twelve months as a result of the proposed 17.5% fee share. When also considering the emissions they would have commanded and the veBAL fees they would have received, the total value of the $120k veBAL position would have been ~$138k. Please note: the TVL of this pool has varied significantly over the past 12 months due to migrations (e.g. TVL of $10m vs. $40m today). If TVL continues to grow, such as when the pool was ~$150m in the past, we’d expect the fee sharing to also grow accordingly.

The $120,000 redirected away from LPs due to this program would need to be offset by Lido through roughly $84,000 in bribes on Aura (see calculation below).

The following analysis uses data from this Dune. The data can also be found in this google sheet.

Component Calculation Value
Pool’s Total Monthly Incentives Average of last 3 months 40,000 USD
Fee Sharing: veBAL Purchase 17.5% of Pool’s Revenue (10,000 USD)
Remaining Incentives After veBAL Purchase 40,000 - 10,000 30,000 USD
Incentive Reallocation
- 70% to LPs already going to vlAURA 30,000 × 70% 21,000 USD
- 30% shifted from veBAL bribes to vlAURA bribes 30,000 × 30% 9,000 USD
vlAURA Efficiency Gain* 9,000 × (1/0.75) 3,000 USD
Net LP Incentives 21,000 + 12,000 33,000 USD
Gross Partner Costs
- Monthly incentive budget necessary to make up for LP deficit 40,000 - 33,000 7,000 USD
Additional Revenue Streams
- Monthly veBAL vote rewards Based on the average of the last twelve months, assuming the fee share program was in place. $1,075
- Monthly passive veBAL revenue 11% return on locked position $1,100
Monthly Net Partner Cost 7,000 - 1,075 - 1,100 4,825 USD
Annualized Impact
Total Partner veBAL position $120,000
Total Net Partner Cost $57,900
Total Net Partner Benefit $62,100
Net Partner Passive Benefits for Year 2 if fully locked Passive yield $1,100 x 12 veBAL incentives control $1,075 x 12 $13,200/yr $12,900/yr

Aura Efficiency Consideration

As mentioned above, in order to bridge the gap of any incentives forfeited by liquidity providers, Balancer will redirect 100% of core pool revenue for these pools to vlAura bribes. Due to the state of the voting market, Aura is smoother in terms of returns and predictable outcomes. Making the ROI roughly 1.3x compared to a veBAL bribe. While all other core pools will continue to respect the split based on Auras veBAL share, these pools will receive the “optimal” revenue redirection strategy. Per Rocketpool tracking reference.

Timelines

Proposal to be discussed on forum for 2 weeks due it’s magnitude. Based on today’s post date of Tuesday March 25th, the vote round of April 10th, 2025 would be when this proposal is eligible for a snapshot vote.

Assuming the proposal passes, any teams interested in proposing to join the Balancer Alliance would post to the forum any time after this snapshot vote concludes. Each proposal is recommended to sit on the forum allowing discussion regarding included pools and incentive plans, for one full week prior to being sent to a formal snapshot vote.

After passing a vote, the partner is not eligible for fee sharing until the following fee round is processed. A partner is not eligible for the fees being collected during their proposal discussion and voting period.

The Balancer Maxis are expected to have to have automation in place for this form of recycling to occur no later than after 2 successful fee processing epochs on V3. Timelines regarding the automated monitoring are to follow upon further evaluation of the scale and overhead this imposes manually.

Cold Start Initiative

Due to the nature of veBAL, there is a barrier for entry to begin participating in the system where voting relative to incentives controlled, revenue generated, and gas costs of operating the position do not make economic sense. In order to combat this, and give partners a warm start on their veBAL participation experience, this proposal invites each Balancer Alliance member to include a request for up to 10,000 USD worth of BAL to be given to them by the Balancer DAO in the form of a loan. The BAL is to be matched with wETH from their treasury and locked as a kickstart to their governance holdings. If a partner ever unwinds their veBAL position, they must commit to returning the BAL equivalent to the Balancer DAO.

Eligibility is subject to evaluation for each project, which will be outlined in each partner’s respective proposal. Committed partners with unwavering commitment to utilizing Balancer as their core DEX would be candidates for this allocation. All proposing alliance members are welcome to present their historic commitment to compel the DAO to loan this BAL as a value add.

Partner Proposal Requirements and Proposal Guidelines

  • Require a Gnosis Safe or Smart Contract
    • Must be whitelisted to lock veBAL, this is a payload attached to each Balancer Alliance Member proposal.
  • Must include proposed incentive package in terms of token, amounts per round, number of rounds, and net goal in TVL leveraging calculations around the prior values.

Disclaimers

  1. The data related to economic performance of veBAL, like any investment, cannot be held to the account that prior returns are indicative of future performance.

  2. No forum post or proposal is necessary for the Balancer Maxis to act on behalf of the DAO when ending a program or portion of the program based on partners not meeting the outlined criteria above. For example, if proposed incentives are not delivered or veBAL is not re-locked by a partner, Maxis reserves the right to turn off the revenue sharing flag. This action would require a public post to the forum with motivation and supporting data only.

  3. If two members wish to join the Balancer Alliance Program claiming rights to the same pool, this is not in the scope of the Balancer Maxi automation infrastructure. For example if Renzo and Lido over a wstETH-ezETH pair. The first partner to lay claim, with the voted and approved incentive package by the DAO must honor this vote. To transition a pool revenue share from one partner to another would require a governance vote and thorough discussion with all relevant parties on the forum.

  4. Any revenue split amongst alliance members must be handled between their teams. The Balancer Maxis will not support splitting revenue of one pool amongst more than one partner address.

7 Likes

This is one of the most important initiatives in a while to drive adoption of veBAL to date. It makes the system relevant again and showcases the power of a decentralized fee sharing model.
I can’t stress enough that we have consistently had >50% returns if an entity manages their veBAL position actively by collecting passive fees and voting incentives. This is very attractive for partners in the long term IMO.

Advantages I see with this initiative:

  1. It is more attractive for partners to provision liquidity with Balancer. If a pool is successful, they will get a share of the pie
  2. If pools generate a lot of fees, it means a significant amount of those will be absorbed to buy BAL and lock in the veBAL system. Any positive buy pressure on BAL is a win!
  3. The more successful a pool is, the more voting power a partner accumulates through fees which synergises very well with our new fee model and core pool framework. I can see clear flywheel effects when the system is fully operational

Downsides are minimal. The fraction of fees redirected to this initiative will have a net positive effect on the system.

Internally, we also made sure that the implementation of this system is feasible and I am confident the Maxis can deliver. We will work with full transparency and automate as many aspects of this initiative as possible.

Overall, the Balancer alliance framework is a net positive addition to our new fee and core pool model introduced with BIP-734. Once fee processing is finally live on v3, and the new fee model is also in effect in v2, we will see overall very positive net effects - both for the protocol and veBAL holders. Absolute win win!

4 Likes

Thanks for this great proposal @ZenDragon. I agree with @Xeonus and think this is a neat way to align even further Balancer and the projects using/building on it.

2 Likes

Maxis have been cooking! Thank you for the great proposal @ZenDragon.

We’ve been tinkering BAL buybacks for a while, but never really reached consensus on what this should look like. I have a feeling this is a great concept that can not only align us with the big defi bluechips, but also further decentralize the protocol, create a bit of volume for trading, and enhance the flywheel. Many birds, one stone! The cold-start loan is also a great solution to hit the ground running, and I hope your bd efforts can bring many more great projects to our ecosystem. Kudos! Full support!

3 Likes

Just want to say how much I support this proposal and how excited I am to see it moving forward. :clap:t4: :clap:t4:

This is a crucial step toward deeper alignment between Balancer and its key partners. Huge thanks to @ZenDragon, @Lipman, and everyone involved. This is strategic, well thought out, and actionable.

Having great partners more directly involved in veBAL and governance is exactly what Balancer needs to scale sustainably. This program helps turn passive users into active stakeholders, which is incredibly powerful for the long term.

I do want to highlight and confirm the E1 vs. E2 distinction, as I think it’s important for everyone to have this clear (could you confirm @ZenDragon?):

  • E1 Partners (with at least one pool over $1M in fees) automatically receive the 17.5% share on those pools. No proposal or incentives needed.
  • E2 Partners must submit a proposal, but there’s no rigid formula. Governance can assess each case individually, request changes, or approve as-is. That flexibility is key.

Just to clarify, the Lido example in the proposal is not a real scenario but rather an illustration of how the program could work for an E2-style case, right? Since Lido is already an E1 Partner, they wouldn’t need to go through this process or provide additional incentives for eligible pools.

One suggestion: I’d recommend reducing the veBAL lock execution period from 8 weeks to 4 weeks. Locking and re-locking are simple to execute, and a shorter window helps ensure alignment remains strong.

Thanks again to everyone involved. This is a big win for the Balancer ecosystem. :rocket:

1 Like

Thanks @Marcus all great questions, glad to get some this proposal is quite heavy. All partners, both E1 and E2, need to make a proposal. The DAO/Maxis need to be notified that their revenue share switch is toggled on and we require their desired safe address to send funds to every fee processing round.

E1 partner pools exist only on Balancer V2 currently, only those specific pools are permitted to be toggled on for the revenue sharing without any incentives, but for reasons mentioned above require a proposal. E2 partner pools, for example the upcoming Lido Fluid-wETH-wstETH, would require an incentive plan to qualify. To elaborate, Aave/wstETH on V2 is Aave’s only E1 pool, all Balancer V3 GHO pools fall under the E2 umbrella. In the future, these E2 pools can become E1 upon earning the necessary protocol fees.

The Lido example is strictly an illustration of “what would have happened” if this program was in place for that pool. It would be E2 if this was set up prior to it earning 1M in protocol fees. Mainly because no protocol fee processing has happened for V3 yet to base a case study on. The same data can be ran for other qualifying pools, or projects can feel free to run the data themselves if they are debating the value proposition of proposing for an E2 pool.

Edit: I missed responding to the E2 partners have no rigid formula, which is correct. E1 partners likely have less friction in my personal opinion to request more E2 pools, however the DAO will decide on every proposal / incentive structure on a case by case basis.

For the lock execution period the proposal states every month is the expected period by Alliance members and the Maxis are responsible for monitoring and reminding them. The 8 week mark is when the Maxis can terminate the revenue share without a proposal. I am open to changing the termination to 4 weeks if that is what you mean, but think it is a very extreme action for only 2 vote periods. If more community members think this should be changed. As it is written currently, every month partners “should” be re-locking before receiving a warning.

2 Likes

Thanks for all the clarifications!
Everything makes perfect sense now, including the 8 week period.
I agree it’s reasonable given the monthly expected behavior and the Maxis’ role in monitoring.

Really excited to see this moving forward.
This is going to be a game changer for Balancer.

2 Likes

For the technical implementation, I can confirm that we already made very good progress and ran a first set of “dry runs” for Balancer alliance fee allocations. A first test with data validation can be found in our fee allocator repository (see PR comments for details)

2 Likes

I don’t hate it, it’s obviously creates a tier system of LPs and pool creators, but okay that’s government.

What I don’t like is favoring one provider, Aura, which will make no other providers want to work with you, in a “This is not democracy…this is anal sex!” kind of way. Paladin and Stake DAO will stop supporting your protocol, or caring much…and no others will join.

So favoratism towards partners creates a two tiered system for LPs…eh, meh…shrug, I guess I’m okay with that, as long as it work.

Anal sex towards partners who have tried to integrate Balancer, …eh, probably unwise.

I understand your perspective on that, competition drives the best outcomes. As it stands, Aura does hold >65% of veBAL so there is a consideration for capital efficiency and appeasing Balancer’s largest stakeholder in that regard. The financial-political landscape is a reality every* DAO must consider. Personally, I think more diverse wrappers would be healthier; but at least we now will have several large DAOs building veBAL positions as a side affect.

Paladin does support vlAura voting, so only StakeDAO may be disappointed by the framing of this program. Teams can still opt to not utilize this, have core pools, and use StakeDAO, naked veBAL or any other incentive approach they choose. Since this is an opt in choice, I’d rather not use the colorful language you chose; especially when it seems a bit extreme for something no one “has” to do.

I hope it works well too :slight_smile:

1 Like