[BIP-XXX] Restoring Balancer TVL & Revenue with PoL from Protocol Partners, Old and New

Governance General Proposal
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Summary:

Motivate Protocols to migrate PoL and incentivized liquidity programs to Balancer by

  1. Deploying a new V3 Balancer pool type that compounds 20-30%% of swap fees into permanent liquidity.

  2. Launching a new PoL Incentives matching program for Balancer DAO Approved Protocols that migrate Liquidity to Balancer PoL pools.

Author:

Astral Protocol: Increasing liquidity provider returns through layered yield strategies, liquidity pools and yield bearing vault tokens.

Background:

Since recent exploits, Balancer TVL has dropped down to est. $160M while concentrated and gyro pools are no longer deployable on Balancer.

With the recent deployment of Uniswap V4, including Uniswap charging 0% fees on new pool types, combined with the latest version of Curve’s incredible efficient cryptoswap pools competing with Balancer’s remaining Pool types, Balancer needs a highly compelling reason for liquidity providers to choose Balancer over the alternatives.

By offering a never before seen Pool type that is designed for growing Protocol-Owned-Liquidity, combined with a program that multiplies liquidity incentives beyond vebal bribes, Balancer will create a compelling reason for large amounts of TVL to migrate to Balancer.

Motivation:

Revitalize the growth and expansion of the Balancer platform and DEX by multiplying Balancer’s TVL, revenue, and the price of BAL.

Specifications:

Deploy a V3 Balancer Pool Type labeled PoL that requires permission from the Balancer DAO for each new deployment.

This Pool type would have an altered base swap fee distribution structure. 30% Balancer Admin fee and a 20% - 30% permanent compound fee (which is burned).

Protocols deploying PoL pools should be encouraged to add a 5-10% creator fee to the Pool that then becomes a permanent revenue stream for the Protocol.

While losing 15% of admin swap fees may sting, onboarding significant amounts of new TVL combined with growing a base of permanent compounding Balancer Liquidity that can never be withdrawn from the Balancer platform will more than make up for lost up front revenue.

Launch PoL migration incentives program for DAO approved Protocols that apply to migrate PoL or liquidity incentives to Balancer V3 PoL Liquidity Pools.

This incentives program would direct bonus BAL incentives to DAO approved PoL pools for 3-6 months. At the end of 3-6 months, Balancer DAO can vote to renew/renegotiate another 3-6 months of bonus incentives.

Amount of BAL distributed would be decided on a case by case basis depending on the amount of TVL being migrated, the value appreciation of tokens within the Pool, the APY of swap and yield fees that the pool generates, and the amount of veBAL bribes and other incentives that the pool owner commits to spending on their Pool.

Bal incentives for the PoL migration incentives program come from Balancer Treasury owned vlAURA. Due to the extremely low value of AURA, now is an excellent time for the Balancer DAO to increase it’s vlAURA holdings.

Astral Protocol recommends that the Balancer Treasury acquire between up to 20M AURA (that’s $550K worth of AURA at current market rates) to fuel the PoL migration incentives program.

In order to not get Rekt while acquiring a large amount of AURA, Astral suggests that the Balancer Treasury acquire AURA over a significant period of time through both TWAMM orders as well as buying AURA whenever it dips.

The Astral Protocol Team would be happy to help manage the Balancer PoL incentives Program.

Voting Options:

  1. Yes, deploy PoL pools and PoL Migration Incentives Program.

  2. No, do nothing.

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Whats the process for this to become a live proposal?

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Hi there @AstralProtocol
Thanks a lot for posting this proposal.
I see several blockers that would need to be resolved first, before this is fit for voting:

  1. We need more details on the new pool type, more specifically if it is a hook we also would need to internally audit it at bare minimum. Can you provide more references to the code base
  2. In general, we need more details on how this new pool type looks like and what the architecture is. Also note the current fee structure you propose is not something that can be easily done as we need to adhere to [BIP-734]
  3. At the current time, the DAO doesn’t have enough POL to justify any meaningful liquidity provision. In any case the treasury council would need to vote if they want to execute such a strategy
  4. There are currently no plans to do additional incentive programs with BAL tokens as the treasury’s BAL reserves are low. Additionally, we don’t want to create more BAL sell pressure by introducing another emission on top of the current BAL token emission schedule

The Balancer treasury already holds a significant locked AURA position and we would not plan to acquire more, see our >2M AURA locker position here

My personal opinion: I really value this proposal but at the current economic state of the DAO such a proposal is too risky. Also note that core contributors will propose general changes in the upcoming days that will make this proposal even harder to justify.
Thanks

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Hello @ Xeonus

I’m really grateful that someone has responded to me about these two BIP Proposals.

Thanks so much for taking the time.

Regarding your statements Ill respond by number.

  1. I think further discussing PoL pool development is a mute point if there’s no flexibility in the Balancer admin Fee. The core aspect of what would make Balancer PoL Pools special would be that a portion of the Balancer Admin fee would be burned, creating permanent liquidity for Protocol tokens and the Balancer Platform.

  2. I’m familiar with BIP-734 however I recently saw that the proposal to adjust the reclaim pool admin fees down to 20% passed, so that was a strong indicator that the Balancer DAO is willing to change admin fees when the circumstances call for it.

  3. The Balancer Treasury has about 10M TVL right? Considering the market cap of BAL is only just about 15M I’d say that the Balancer Treasury is actually quite robust and could have a significant impact on the Balancer ecosystem if the Treasury Council wants that. By the way, who is the Treasury Council and is there any way i could speak to them? I notice that there’s huge potential for the Balancer Treasury to generate more yield and higher capital gains by deploying tokens that the Treasury is already holding.

  4. Right, allow me to clarify, I was proposing that the Balancer Treasury purchase more AURA, which is dirt cheap right now, and then use that AURA to direct existing BAL emissions to PoL Pools. This wouldn’t increase Bal emissions at all. Rather it would direct existing emissions.

Aww, thanks for sharing your personal opinion. It’s nice to have one’s time and mental efforts appreciated. You are most likely correct on all accounts.

I am curious to hear from Balancer Core team. It’s been dead quiet in the Balancer discord and forums recently. I almost thought everyone had quit.

1 Like
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Hey @Xeonus

On a unrelated note, do you have any Idea why AURA bribes have been outrageously high the last few weeks? I mean, its to the point where i saw the bribe efficiency average actually super negative, to the point where some bribers were actually losing about 65% of their bribe.

I’m guessing AURA whales are trying to jack the price up for their huge liquidations. I did notice some absolutely massive sales during this period of insanely boosted bribes.

I think i’m gonna wait awhile longer for AURA to really bottom out. With 1.2M Market cap, surely it must be close to its bottom right?

Anyway, im asking about this here because i havn’t found engagement with the Balancer or Aura communities anywhere else so far. The discord chats are ghost towns.