[BIP-XX] Add Paladin's Quest to the Core Pools and L2 Incentivization program

Hello everyone,

We are officially expanding Quest and Warden to the Balancer ecosystem. This means that starting the next round, DAOs will be able to use our dapp to access the Balancer gauge, and in a couple of weeks, LPs will be able to buy veBoosts to maximize their yield strategies.

The goal of this post is to include Quest into the list of service providers contributing to the Core Pool Incentive program highlighted in BIP-19.

What is Quest ?

Quest is a gauge acquisition tool that allows DAOs to incentivize veToken holders. Yield is fixed by the quest creator since a specified amount of voting power is targeted. This means once loyal voters fill a quest, no additional votes are rewarded, ensuring maximum efficiency for DAOs. Overall, this approach is more sustainable for bribers. You can find more details about the mechanisms here.

Why should it be added to the Program ?

Currently, the Core Pool Incentive program is only relying on Hidden Hands. So why add another bribe marketplace?

As mentioned previously, Quest is a radically different solution in the sense that it enables bribers to fix their rate and know exactly how much they’re paying per vote.

DAOs can manage their budgets better and play the gauge wars without spending more than the emissions they attract, especially when the market is irrational. For Balancer this is specifically relevant because the previous round of bribes is finishing at ~0.23$ / vote while each vote directs 0.14$ of emissions. From what we have gathered, this 40% markdown is an intentional strategy to attract more veBAL lockers with high bribe APR. While extremely smart, we believe the Balancer DAO should be vigilant in totally killing the organic bribe market with subsidies that make the base layer unprofitable to incentivize.

Having two bribe marketplaces with different systems would allow the DAO to maintain high bribe APRs on certain pools, while offering LPs extremely high APRs on other pools since they would have bribes optimized for BAL emissions. This would attract more TVL to the protocol.

Additionally, Paladin will try to provide a unified marketplace for both veBAL and vlAURA in the very near future, which should free operators from some menial bribe-splitting tasks, as well as other modules allowing for a more composable and decentralized approach to gauge incentives.

How should this Program be amended to include Quest?

In BIP-19 we requested a framework of bribe sharing to avoid an implementation roadblock during our request. Since we weren’t able to introduce a framework because of time constraints, we suggest the following approach:

  • Split Core pools between “High Growth Priority” (most lucrative ones) and “Low Priority / Mature Pools”
  • Mature Pools would go to Hidden Hands, where they would offer juicy bribe yield to create a “Lockening”;
  • High Growth Priority Pool would go to Quest, where bribe prices would be lower but the number of votes attracted would be significantly higher, effectively attracting more LPs to the pool.*

Any feedback is welcome.

*There will always be demand on Quest because the yield rate is fixed and the soon to be unified marketplace with vlAURA will allow the use of governance arbitrage to attract vlAURA voters.

** Paladin has set up a Partner Program with a fee-sharing mechanism, we think the program can be activated for Balancer to redirect the fees to finance contributor initiatives.

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We welcome external providers to the Balancer community and think having more than one provider is important. One issue with BIP-19 was the reliance on Hidden Hand, and it is important that we do not let Hidden Hand dictate and maintain control. This quest model provides another longer-term mechanism alongside the current short-term bribe solution.

However, we would like to see examples of protocols that have used Quest? What was their uptake like? How has quest faired against other bribe protocols when used in the same protocol?

Also, to clarify, we could request to share up to 50% of the fees with your partner program. I can see in the PIP-3 that there was some discussion about adjusting fees on the volume. Is that still the case?

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I think Quest is a much better fit for 3rd party bribers - for example, Lido and Stader should give this product serious consideration imo. The reason I say that is because 3rd parties never want to pay more in bribes than the emissions they stand to earn.

The goal of BIP-19 is to make voting so lucrative that new voters enter the system to take advantage of that. We did significantly “overpay” in the most recent round on Balancer’s HH market but this is actually working as intended. It would be very hard to know what $/vote to set on Quest since we want the maximum number of votes we can get and we do not really care how much $/vote we pay.

Even if you believe this strategy is dumb and can’t work (new voters won’t come no matter how lucrative it is), you then face the question of where should all the extra money go. Sending it passively to veBAL kinda kicks the legs out of BIP-19 imo. Sending it to the DAO rugs veBAL of their share of fees. Open to ideas.

Pending more discussion, etc for now I don’t see Quest as a good fit for BIP-19 activity. Other DAO’s that are bribing should strongly consider using it though.

edit: please leave the topic as [BIP-XX] so the voting order isn’t messed up. This will be assigned a BIP number when/if it goes to a vote :slight_smile:

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We officially launched yesterday ! You can find our interface here: 1. Warden | Dashboard

The feedback we can take comes from our operations on Curve, namely with Threshold, who we have been working with for the past 2 months; Outside of high upward volatility weeks, Quests have been mostly filled up with high stickiness.

Yes, I will post a summarized table to give a clearer understanding of how all of it works. But the rate is 5 to 50% depending on the volume brought to the dapp.

The problem is not just with the emissions rate being saturated, but also because of the signalling created by the main DAO distributing on one sole platform. Subsidizing the business of one service provider is the fastest way to create a monopoly. Proof of that is Stader recreating a bribe directly after an unprofitable week.

From what I’ve understood, the goal is to massively attract voters, and, as you said, it is working out perfectly (more than +10% veBAL locked this week). But why not just create a zero sum game for the DAO instead of a negative sum game ? Currently 90% of the LPs are locked, it’s not just lockers, but LPs that need to be attracted.

It is fairly easy to create by setting the Quest $ / vote price at the emissions rate (that’s 130% APR). From what I’ve gathered, a lot of people are scared of locking because they believe the subsidized yield is unsustainable, by using this, sophisticated degens might see more sustainability for the system. Quest was built to solve this.

It’s fairly easy for us to check how many votes are getting bribed on the layer, simulate inflation and offer a very competitive incentive. The current set up makes you dependent on market irrationality while with Quest, you’d be able to have a more data-driven approach.

We believe it was the best decision with the tools at hand but regret a framework was not put in place to specifically understand when it is not relevant to use Hidden Hands for that said program when it was proposed. I 100% agree reinvesting in growth is the best move right now (this is also a question we have internally for Paladin) and the data shows veBAL is growing thanks to it.

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I’m not sure I follow this logic really. When you zoom out to a holistic view of total $ spent on bribes vs total $ of emissions these two numbers are very far apart today. Saying the current yield is unsustainable is missing the big picture imo. The yield is not only sustainable but it will rise as the gap between protocol revenues and protocol emissions narrows. The rate of this rise will be determined by whether votes decide to follow the voting incentives, or not.

Even when we reach protocol revenue = protocol emissions, that’s not a ceiling on bribes. Balancer Protocol is distributing protocol fees via bribes - if these fees are worth more than the emissions, that’s actually a good thing. and to be honest that is my ultimate goal.

I appreciate the response and I sympathize with your view that we are creating a monopoly with Hidden Hand. They were first movers and they’ve spent a lot of their own dev work to support Balancer and the BIP-19 initiative. I am certainly not opposed to using Quest but the reality is you designed this product for DAO’s who don’t want to overpay for emissions. Balancer Protocol does not mind overpaying and I would argue for this to really work we must overpay. This strategy doesn’t seem compatible with Quest as it stands today.

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Thanks so much for this proposal and congrats on the great products you guys are launching!

I agree with most of the points you brought up while I also agree with @solarcurve’s.

Isn’t there a compromise where we don’t touch/change BIP-19 but still experiment with bribing with Quest? The DAO could use some BAL from the treasury for bribing specific pools (TBD) on Quest?

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