[Proposal] Allocate up to $2MM in BAL to Secure a BAL Reactor

Authors - BLABS Business Development (@curtis, @Jared_Balancer and @alan1) + @solarcurve


Approve a “dry powder” allocation of up to $2MM BAL for Tokemak bribe acquisition in connection with BLABS biz dev efforts to grow integrations with Tokemak

What is Tokemak?

Tokemak can be thought of as a generalized liquidity layer that sits above DEXEs. Users can both LP and direct where the liquidity will go via TOKE voting.

Tokemak has two types of reactors - reactors can just be thought of as a place users can single side stake their assets to earn yield, then the assets are directed via TOKE voters to determine its pair(s). There are pair reactors, those can be thought of as the assets that are generally paired with protocol tokens - being ETH/USDC/DAI/FEI/etc. Then there’s the token reactors, which are voted on and added during a "CoRE’’ vote - namely SUSHI/FOX/FXS/etc.

Up to this point TOKE has been distributed via LM incentives for their toke/eth pairs on Uni and Sushi. As well as from staking TOKE to reactors to incentivize Liquidity Direction (and some token swaps).

The ideal future state for Tokemak is most if not all TOKE is being vied for by AMMs/other protocols to direct liquidity towards their token or platform while Tokemak controls a large bag of protocol owned assets that are earning fees and being utilized to stand up other protocols liquidity.


Tokemak currently provides options for four different DEXes users can direct their liquidity - Uniswap, Sushiswap, Curve and Balancer. Of the four, Balancer is by far the lowest performing. For reference:

  • FXS Reactor
    • $514k/$175.2MM directed towards Balancer (0.29%)
  • ALCX Reactor
    • $709.80/$32.1MM directed towards Balancer (0.002%)
  • FOX Reactor
    • $0/$22.2MM directed towards Balancer (0%)

As of writing this proposal Tokemak controls $905MM worth of assets that TOKE holders are directing to the above mentioned DEXEs. Balancer is currently commanding less than $1MM of that.

Every 5-6 months a new CoRE vote goes live to determine the next round of projects that will launch their own reactors. As of writing this piece this is by far the lowest cost barrier to entry for a CoRE vote to date. The last CoRE vote reached a peak of ~$0.75/vote, while the highest bribe on Hidden Hand is commanding just ~$0.07/vote.

Reactors provide several benefits, namely those being

  • Ability to stake a protocol’s assets to farm TOKE, which can then be staked to direct liquidity to Balancer.
  • Opens the doors for a token swap with Tokemak to allow Balancer to kickstart Liquidity Directing, currently the best deal on this is FXS where one TOKE can direct up to $114 of FXS
  • Makes all future partnerships and integrations infinitely easier due to the Balancer community showing some support for Tokemak
  • Pending the launch of the reactor, the reactor could potentially be prewired to deploy to gauges to veBAL and further incentivize a TOKE/ETH 80/20 pool (Liquidity is deployed in cycles). Attracting further liquidity for TOKE/ETH providers away from Sushi/Uni.

Cost-Benefit Analysis

The below Cost-Benefit Analysis assumes 10% TVL utilization at 30 bps and a $4MM token swap is performed with Tokemak. This does not include if any BAL was staked in the Balancer Reactor. The top row shows different scenarios based on a WACC varying from 10%-20% for BAL. As can be seen from the Net Cost Benefit section, this would result in a positive $1.46MM-$1.66M benefit to Balancer, as well as $35.26MM in TVL captured.

10% 15% 20%
Bribe Cost $2.2MM $2.3MM $2.4MM
Swap Amount $4MM $4MM $4MM
TVL Captured $35.26MM $35.26MM $35.26MM
Annualized Fee Revenue $3.86MM $3.86MM $3.86MM
Net Cost Benefit $1.66MM $1.56MM $1.46MM

*TVL captured is found by utilizing the info in the FXS reactor, where 1 TOKE = $114 of liquidity available to be directed. 1 Toke = ~$13

It is also worth noting that TOKE has shown only a 0.14 correlation with ETH while BAL has shown a 0.50 correlation with ETH.* This effectively acts as a way for the Balancer Treasury to diversify out of assets directly correlated with ETH while simultaneously providing the benefits listed above.

Plan of Action

Tiered Bribe Deployment

The average cost for one TOKE via bribing last CoRE vote was ~$0.75, each TOKE equals six votes. To qualify for a Reactor last CoRE vote, 12 million votes were required. As of writing this proposal only one protocol has deployed any bribes and that is LUNA, who have deployed ~$257K worth of bribes and accrued ~4.4MM votes. This is far less than $0.75/TOKE.

What we propose is instead to send out tiered bribe amounts, starting at $0.35/TOKE and scaling to $1/TOKE utilizing $2MM of BAL to bribe with.

Reactor Farming + Potential Token Swap + Biz Dev Efforts

As illustrated in the above Cost-Benefit analysis, securing the BAL reactor + token swap would lead to a net gain in all scenarios plus the additional benefit of TVL captured.

We propose that after the bribing period Balancer engages in a Token Swap with Tokemak to seed the initial reactor and allow for Balancer to start directing TVL to it’s platform. Currently the best deal is FXS, however we can deliberate on that post CoRE vote.

This is also part of a holistic discussion that the biz dev team is working on with Tokemak, which includes:

  1. Developing default 80/20 pools for deployment on each reactor, which will help differentiate Balancer from other DEXs + raise awareness on their benefits for LPs
  2. Working with Tokemak to explore veBAL program as an alt to veCRV on Toke/WETH
  3. Discussing boosted pools and stable pools as an option for their exchange assets to increase capital efficiency when retained in the PCV account
  4. Balancer reactor as a means to acquire TOKE for Balancer as an LD

BLABS Biz Dev believes that Balancer is in a unique position to compete with LDs globally on Tokemak to acquire TVL for our long term growth. The CBA proves that under conservative assumptions. Tokemak is heavily interested in this as well (for their growth), but finds it even more interesting if it helps bootstrap the flywheel for their involvement in veBAL. There are a number of synergies to be had here with both assets serving as productive for Tokeamk and Balancer.

Targeted veBAL Education

As a way to dissuade Hidden Hand users from instantly dumping the BAL, run an educational campaign on the value of veBAL. This could come in the form of an AMA with the Tokemak/Redacted communities and/or targeted Twitter Threads.


  • Bribe is insufficient and BAL used is lost, this is highly unlikely considering the current bribe market and protocols involved. For additional context all Tokemak voters are highly aware of Hidden Hand and utilize it to auto deploy their votes. Most voters have not delegated as they are waiting to see how much will be deployed to Hidden Hand.
  • Smart contract risk - Hidden Hand exploited during the bribe period, Tokemak exploited. However this is also highly unlikely and is a necessary risk when deploying funds anywhere in DeFi.
  • Risk can also be mitigated by purchasing Insurance cover via InsurAce (InsurAce)
  • Both projects have been audited multiple times (Tokemak Audits, Hidden Hand Audits)


If approved, $2M BAL at the prevailing market price when the vote ends (~155k BAL at time of writing) will be sent from the DAO Multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f to the LM Multisig 0xc38c5f97B34E175FFd35407fc91a937300E33860


What does this mean? tBAL would need to be fungible and if its locked up in veBAL, then users won’t be able to withdraw BAL from the reactor in full. Perhaps there is a way around this but it goes against what the current reactors are doing to the best of my knowledge.


This is purely something that could be discussed with Tokemak post deployment and shouldn’t be considered as a core part of the proposal. Liquidity is deployed from Tokemak in cycles and votes for veBAL happen in cycles, a small change that we’ve thought about is if a BAL reactor is launched there’s potential for it to be deployed to veBAL and auto staked to vote for a TOKE/ETH pool to further incentivize liquidity be deployed to Balancer.

This is outside my technical expertise and requires a bevvy of other bits of information and efforts to get there. tBAL would still be fungible, I think the key piece you’re missing is that Tokemak liquidity is sent out in cycles.

  • There’s also the added bit that natively when assets are deployed to a reactor a small portion is withheld in reserve to account for IL. This could be natively changed to account for any sort of withdrawal period for BAL however like I said, this is just purely speculative and needs to be discussed on both sides technically and I don’t think matters in the context of this proposal as much as the core parts of it.

I encourage everyone to research what a toke reactor actually does and try to decide for yourself whether it makes sense to establish a BAL reactor if the goal is being able to direct liquidity There is genuine opportunity to get involved with Tokemak but getting a reactor is not it.

If we want to direct liquidity, we should acquire TOKE. There are much better ways to do that than paying 2m for a non exclusive farming opportunity. I have yet to hear a satisfactory explanation of why we want a BAL toke reactor. We want to be able to direct liquidity, if we establish a reactor, TOKE holders will be directing BAL liquidity!

I also strongly question the technical feasibility of using reactor BAL in veBAL without significant changes. Locking one week at a time is incredibly inefficient and I doubt there will be a simple solution to this problem.

As stated above, I really think there are potential collaborations between Tokemak and Balancer that are beneficial to both parties, but I strongly believe THIS IS NOT IT.

If you have an opinion on this, please make your voice heard.

Thank you Curtis for posting a revised proposal.


Thanks @Curtis and Biz Dev team for taking the time to post an overhauled proposal. While I am against engaging in this bribe for various reasons (BAL price appreciation, potential technical loopholes with reactors etc etc) I see that this proposal meets the requirements to go for a vote. Let veBAL holders decide if they want to engage in this endeavor or not.

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I think this is a question for the Integrations Team but something I wouldn’t want to take their time to think about at this time. I personally see no reason why it couldn’t be done, the point of me including was to once again showcase just one of the many potential reciprocal partnership opportunities that could arise from having the Reactor. However I’m unsure of any issues technical issues with the reactors regarding @Xeonus’s point. They have passed 3 audits and have yet to be exploited with significant capital deployed, that is impressive in itself in DeFi.

TOKE holders will be directing BAL liquidity but what benefit would it be for them to deploy it somewhere there is no pool? To my knowledge the only pool with any volume is on Balancer, Sushi/Uni/Etc. have either no BAL liquidity nor a pool made.

There is more to security than audits. It’s about the complexity of the system. Tokemak is a dynamic system with new protocols to deploy into being actively developed. I think when analyzing defi projects its important to state all the possible outcomes. I’ll give a couple examples

  • Can tokemak governance/dev team technically seize reactor deposits?
  • Where will the BAL in the reactor most likely end up? (still haven’t gotten an answer to this)

So what will this bal in the reactor do? just go to a balancer pool with no rewards in it?

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Like I said we can determine where the BAL would go, as in work with Tokemak to say hey we want the Balancer pool to be “X” pool. As for the BAL Reactor that’s something we can talk to Tokemak if this passes and work on the best solution for all parties.

As for the security concerns I hope you put as much thought into this proposal as you do when/if you yield farm. Technically stASSETS from Lido are subject to slashing rates and could potentially be exploited despite being audited, Aave could be exploited, as could anything else, I don’t think the argument around anything could be exploited is valid.

With that said I think all opinions have been made, I don’t see any point in furthering this conversation. Lets let the BAL holders decide.

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Don’t toke holders decide where the bal will go?

This is simplifying a nuanced conversation. There is a degree of risk when it comes to defi protocols and I think it’s important to analyze the moving parts so we as a DAO can make sure we know what we are getting involved with. I am disappointed with this response and I think it demonstrates a lack of attention to detail when dealing with a large amount of treasury funds.

You are free to tap out of this conversation but I think it is honorable to defend one’s positions against genuine criticism.

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I would echo @Curtis 's points. I think we can all agree that the value of holding Toke as 1 of the 4 destination DEXs is high. 1 Toke (~$13) can buy ~111 FXS/ETH liquidity. Very attractive. So the reactor plays into this from an execution perspective - “what is the most efficient way for us to acquire Toke and build a relationship with their community.” We see this proposal as the most efficient execution strategy that hits both of these objectives + opening up another sink as @solarcurve has mentioned previously.

Looking at the structure of how a reactor works - we use our BAL to collateralize it and we jumpstart our LD campaign as new holders of TOKE. What we do beyond this with the Tokemak community is still up for discussion. The connection to veBAL has been pitched as a campaign to have Tokemak use Balancer vs. Curve in regards to TOKE/WETH liquidity. More to discuss there once we get moving!

Our perspective is that this is the way. I completely understand your reluctance, but I hope you can see from the various responses and proposals that we have been very thoughtful about this.

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I guess I will agree to disagree on farming BAL at 11% apr being anywhere near the most efficient option to acquire TOKE. It will take us two years to acquire 2m worth of TOKE (while risking 10m worth of BAL) assuming all incentive allocations remain constant. Surely that is not enough to do what we want to do?

I will remind veBAL voters:

  • It will take 2 years to get a positive ROI on this assuming we are farming 10m in bal @ 11% and everything stays constant
  • There is no evidence of any infrastructure that can support veBAL locking within a toke reactor

What this proposal does is give us a non exclusive opportunity to farm BAL at 11% apr, everything else is intangible.

I propose we buy TOKE instead. Very simple and much more capital efficient.

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This is not true.

If we get a reactor we give BAl to collateralize the reactor and we get Toke in return which allows us to direct it as an LD.

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The TOKE is what lets you direct liquidity, not the establishment of a reactor, for which we have no privileged access to. This is just a chance to farm TOKE.

Please read my original post as you are disregarding answers and potentially confusing readers/voters.

I will reiterate what I said in my prior response. Winning a reactor allows us to enter into a token swap with Tokemak where our BAL is safely deposited in a reactor (not sold on the market) and we receive Toke to start as an LD. There are other benefits that I highlight including adding another “sink” to BAL/ETH. This is extremely efficient.

Also please refrain from posting incorrect statements as you have done in your past post - I would direct readers to Tokemak’s first Core vote medium post to highlight how this process works. Quoting Tokemak’s Collateralization of reactor article, which highlighted the process and will be a heavy consideration for us as we spin up a reactor we have won:

When the top five Reactors are decided at the end of C.o.R.E., the Tokemak team will approach each of the winning Reactors’ respective DAOs/teams to discuss the possibility of a DAO to DAO, TOKE<>ABC swap in order to initialize a given Reactor’s reserve assets.

This DAO to DAO engagement allows for a mutually beneficial exchange to occur, where Tokemak can establish the DAOs token reserve, and the protocol will be able to participate in Liquidity Direction through Tokemak. The reserve of ABC assets acquired through this swap would then be utilized in Tokemak’s IL mitigation mechanics, which will be further detailed indepth in our Gitbook (to be released soon).

If Tokemak is unable to secure a proper reserve of assets from one of the top five projects, the sixth most-voted project will become eligible for a Reactor for the above approach, and so on. Tokemak has already had an encouraging amount of interest from numerous DAOs, and we’d encourage any other DAOs that might be curious about the effectiveness of Tokemak’s utility to please feel free to reach out to us.


Do you see Tokemak holding BAL similarly to how they hold CVX and CRV? DeBank | Your DeFi wallet as you can see, their CVX and CRV are locked up, therefore making a reactor infeasible (in their current state at least).

Wouldn’t it be a lot smarter for them to have the full potential of their holdings as opposed to being limited to locking weekly?

Would appreciate a response to this and then I will stop bugging you.


Yo I’ve been following this since the first post by solarcurve. The progression of ideas has been interesting. I’m a long term bal holder and just want to see things go well.

I think there’s one thing that maybe is misunderstood. @Mike_B - I work in BD at several projects and while it could (not likely, token swap is way cheaper) be more efficient to buy toke, building a relationship like this is infinitely more valuable from a BD perspective on the value that can be extracted.


I think the piece you are missing is the bifurcation between Tokemak the DAO and the reactors.

1/ The reactors are fully permissionless constructs at the end of the day. LPs deposit ABC Token and LDs direct ABC token. We want to be an LD and thus play in the “Toke Wars”

2/ Tokemak the DAO is fostering TOKE/ETH liquidity and thus they have looked for solutions to hit the “singularity”. You can see here how they plan to leverage Curve for this. This is completely separate from the creation and direction of liquidity in reactors. We see long-term benefits to pitching Tokemak DAO to consider Balancer as a destination for Toke/WETH and how veBAL can be helpful. We want Tokemak to enter the BAL wars!

Two separate exercises, but still linked implicitly. I would encourage readers to read the section in the proposal on how biz dev has been thinking about a holistic relationship as well as the CBA put together. More details there.

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I understand the principle of what you are saying but i think its clear in this scenario that farming at 11% apy is not a efficient means of acquiring TOKE. Feel free to disagree on that point, but it will take two years of farming 10m of BAL to recover the cost of this bribe (assuming everything stays constant). Appreciate your comments throughout this process!

This does very little to communicate how a toke reactor will allow TOKE to enter veBAL other than “establishing a relationship”. The BAL in the reactor cannot be efficiently used in veBAL unless substantial changes to the architecture are made. Thats my point, end of. If we want to get them involved in veBAL why is the strategy not to do handle it just like curve considering it’s the same exact system! Instead you have to impose severe limitations to ensure tBAL fungibility.

I’ll leave it at that though. I think these conversations have done enough for veBAL holders to decide whether its worth parting with 3-4% of our treasury for this strategy.

I encourage people to read the original proposal and the comments

Hello guys, I saw this discussion mentioned in the Tokemak Discord and thought I’d come and add some info as someone familiar with Tokemak (also a long time Balancer user/LP) in case that is useful for people here to make a decision (it looks like the vote is heavily tilting towards no, but there’s two days left, so I hope this information is useful anyway).

It looks like there’s a lot of confusion between liquidity direction (LD) and the Reactor.

First, let’s look at a Reactor and the benefits of it for BAL.

Basically, the purpose of a Reactor (for most projects - it’s different for stablecoins) is for DAOs and projects to easily get liquidity for their native token, without expensive Pool 2 inflationary emissions/rewards to incentivise liquidity AND without worrying about IL, and without worrying about finding ETH or a stablecoin to add to the LP. It’s also way cheaper.

If BAL succeeds in getting a Reactor, then you would do a token swap between BAL and TOKE for say $2m or $4m (so diversifying the treasury and not an expense since you are getting TOKE in return). Tokemak would then pair that with ETH from their own reserves (so the IL hit will be on TOKE holders not BAL or BAL LPs etc) and add liquidity to any BAL/ETH pool (in this case, I assume the Balancer one, but could be on any supported DEX).

The exact amount of liquidity added will depend on TOKE voting in the liquidity direction, but you will now have a large chunk of TOKE (after the token swap) to direct a lot of BAL/ETH liquidity to be added (the same voting process also controls where the liquidity will be added and you can of course direct it to Balancer itself). If you want more liquidity than you can direct with your TOKE, then you need to either buy more TOKE, or bribe TOKE holders (Curve style) to vote to direct more liquidity (note: liquidity direction voting is live on Tokemak, but bribes for liquidity direction are not yet live at Hidden Hand - so far only bribes for CORE votes - but LD bribing is coming).

Oh and also your TOKE can be staked for a 25-27% APR in TOKE rewards currently adding to your Treasury revenues and diversification, plus any bribe revenue in future CORE votes or liquidity direction bribes.

Basically once you have a reactor - no more inflationary BAL rewards to incentivise BAL/ETH liquidity on Balancer. No need to spend ETH to add to the LP - BAL is just single-staked (by the DAO or by BAL holders) and TOKE takes care of ETH. No IL worries for anyone single-staking BAL (any IL suffered by BAL single stakers is backed by TOKE holders - it’s quite a complex system). Also no need to pay regular bribes for liquidity like on Curve (unless you want more liquidity than you can direct with the TOKE you hold, but even then, cheaper than Curve bribes).

I don’t know the current situation with BAL/ETH liquidity or how it is incentivized. If you are already happy with it, then there is no reason to change, but if it is a typical Pool 2 funded by BAL emissions, then this is a far superior model for a bunch of reasons and I would suggest doing what it takes to get a Reactor. It’s true that any money spent on bribes is gone - it’s a one off expense - but at this time the bribes look super cheap, although they tend to increase in the last couple of days.

Second main point:

There seems to be a lot of discussion here about using TOKE to direct liquidity to Balancer

As others have pointed out, this is unconnected with having a Reactor. You can buy TOKE and direct liquidity to Balancer and increase Balancer liquidity a lot right now. Or (when live) you can bribe TOKE LDs to direct that liquidity.

However, the downside here of course is that you can only direct that liquidity to tokens/pairs that already supported by Tokemak and already have Reactors - not to BAL liquidity (if you don’t have a Reactor).


My suggestion is that if you want to improve the structure of the BAL/ETH pair and eliminate emissions etc (as described above), then it makes sense to get a BAL reactor and pay the bribes - you will earn back the bribe money very quickly in saved emissions.

If you are happy with the BAL/ETH pair, and liquidity on it, and the emissions cost, IL etc, then you do not need a BAL Reactor and there is no point going for one.

However, then it would be worth simply buying TOKE on the open market (for the same reason DAOs accumulate CVX/CRV) and using it to direct liquidity to Balancer (and benefiting from the TOKE rewards as a revenue source, just like CRV rewards etc). If you’re doing that, now is a very good time to buy TOKE - the price has been crushed even worse than the rest of DeFi, because they used to have TOKE pools with very high rewards on both Uni and Sushi, and they are now phasing out rewards for the Uni pool over a month, which means $100m of liquidity in the Uni pool is exiting and dumping the price hard until it stabilizes - so now is a good time to acquire cheap TOKE.