[Proposal] Balancer V2 Liquidity Mining Program

Balancer V2 Liquidity Mining

After discussions with the community on the Forum and Discord, we feel there’s sufficient consensus on the prospective Balancer V2 liquidity mining program to make a formal proposal.

Specification

In V1 liquidity mining, each LP receives their proportional share of the weekly 145,000 BAL distribution, according to their adjusted liquidity (i.e. after all adjusting factors are applied to their raw liquidity in USD terms).

In V2 liquidity mining, specific pools will each get a fixed amount of BAL per week, and LPs who stake their BPTs will get their proportional share in those eligible pools.

With that in mind, there will be 3 different liquidity mining tiers for eligible pools:

  • Tier 1 (T1): 15,000 BAL (4 slots, total of 60k BAL per week) - Pools where strong liquidity is paramount, e.g. for acting as hubs by connecting liquidity in order routing.
  • Tier 2 (T2): 5,000 BAL (10 slots, total of 50k BAL per week) - Strategic pools, e.g. having strong potential for high volume given high liquidity.
  • Tier 3 (T3): 2,500 BAL (14 slots, total of 35k BAL per week) - Promising pools, e.g. containing newly launched tokens or small cap projects (unproven potential for high volume).

It’s important to highlight that more than one slot may be allocated to a single pool. As an example: If the 80/20 BAL/ETH pool has a targeted allocation of 25,000 BAL per week, then it may consume one T1 slot along with two T2 slots.

Transition from V1 to V2 Mining

The transition from Balancer V1 liquidity mining to V2 will be gradual and may take several weeks. As an example, it could start with only a few of the tier 3 slots being filled by the main V2 pools, with new slots being "activated’’ on a weekly basis.

At every activation, the corresponding amount of BAL is subtracted from the weekly amount available in the V1 liquidity mining program. This way the total BAL distributed through liquidity mining between both V1 and V2 pools will always stay the same at 145,000 BAL per week.

As the community becomes more confident that there are no vulnerabilities in the V2 smart contracts, more of the liquidity mining program is expected to shift from V1 to V2 until the entirety of the V1 allocation is exhausted. This can happen by having more of the available slots being assigned to V2 pools, and also by upgrading a V2 pool to a higher tier.

Ballers Committee

Eligible V2 liquidity mining pools and their BAL allocation will be decided weekly by a committee of Ballers according to community input and their own judgement, having the long term benefit of the protocol in mind.

This Baller committee acts as the first step in the progressive decentralization of Balancer. The goals in using a small committee is to avoid extensive overhead on BAL governance as well as to provide quick responses according to market conditions. Ballers will use a specific Snapshot space (separate space from traditional BAL governance) so that the community can easily keep track of those decisions.

All decisions made by Ballers will be made public on Balancer’s forum shortly after the end of the committee weekly meetings (ideally within 2-3 hours). Highly respected individuals and working groups in the space may also be invited by Ballers to these meetings to provide strategic input. Gauntlet, Dan Elitzer and Cooper Turley have already agreed to participate on these meetings.

Unless otherwise expressed by BAL governance, the transition period will take no longer than 8 weeks from the start of V2 mining and will end with the four T1 slots being used by the following pools:

  • 80/20 BAL/ETH, dynamic fee
  • 60/40 ETH/DAI, dynamic fee (may have different weights)
  • 50/50 ETH/WBTC, dynamic fee
  • DAI/USDC/USDT stable pool

Generally speaking, T2 & T3 slots are meant to be more flexible. These tiers may be updated more frequently even after the transition period, without the need of changes being blessed by BAL governance.

Keeping govFactor for V1 mining

The govFactor proposal approved by BAL governance on 2020/12/20 created that factor as an experiment that would initially last for 3 months. This current proposal extends the application of the govFactor indefinitely, therefore keeping it permanent. As Balancer V2 mining isn’t compatible with factors, the govFactor will only apply to the portion of liquidity mining that still remains on Balancer V1.

More about Ballers

Ballers are core community members who have consistently contributed to the Balancer ecosystem. Some high level examples include:

  • Actively participating in key BAL governance topics
  • Helping educate and inform other community members
  • Creating tools that ease/enhance the UX for Balancer users

The initial cohort of Ballers was elected in Q4/2020 by individuals from Balancer Labs who were closely following community discussions. There are currently 10 Ballers who can all be identified by the “Baller” tag in the official Balancer Discord.

The Ballers group is expected to expand and rotate over time, encouraging regular community members to keep a high level of engagement so they can eventually become Ballers too!

BAL governance has the ultimate power to elect and dismiss Ballers through Snapshot votes. Ballers and the broader community will however constantly assess how participative Ballers are and how good their decisions on the allocation of liquidity mining slots are.

Summary

Liquidity Mining in Balancer V2 will operate in 3 tiers with selected pools strategically assigned by the Ballers committee based on demand for liquidity. It’s important to note that only select pools will be eligible for liquidity mining allocations.

The transition from V1 to V2 will take place over a targeted ~8 weeks with BAL liquidity mining allocations incrementally migrated to V2 on a weekly basis. Throughout the entirety of the migration, the weekly BAL distribution will remain constant at 145,000 BAL per week between both Balancer V1 and V2.

Vote

Balancer V2 Liquidity Mining Framework
  • Yes, in favor of the above framework
  • No, against the above framework

0 voters

7 Likes

I’m in favor of this proposal.

With Balancer V2 around the corner, it’s important that we lock in this framework moving forward.

I’m most bullish about the potential to stake LP tokens for BAL rewards, moving this distribution to a more programatic and automated system relative to the current system.

I also envision some pools may exist on Balancer V1 forever (Aave Safety Module for example) and we should look to explore where this slots in to the 145k or if its a new grant that stands on its own.

Very much in favor of this govFactor transition. Would love to explore a way to accommodate this in some way shape or form with V2 as well once most of the rewards have been migrated over.

Can personally vouch for the Ballers and look forward to sitting in on committees to roll this over come Balancer V2!

1 Like

Solid Proposal. I see Ballers election/designation as a corner stone of it.
In the future, should Ballers be elected publicly & transparently after they’ve vouched to act in a good way and behave impartially for the good sake of the protocol? If Balancer labs was to re-elect 10 of its team members as Ballers, that could be detrimental to the project and for its overall decentralization.

:fire: _ :fire: all the way.

3 Likes

hi, being not very familiar with this specific pool, I’m curious as to why it is more convenient to keep it on V1.

hi,

will the BAL factor be maintained?
Can you clarify this? A 17% APY for BAL pools looks very unattractive to me

1 Like

There will be no factors in Balancer V2.

In order to ensure that the yields are in-line with expectations for BAL/ETH pair LPs, the committee will likely use multiple slots within T1, T2 and T3 to boost the APY.

2 Likes

I think before voting in favor/against this proposal we should first define what are the rewards for BAL users. Unless we want to see the coin tank like a rock! :joy:
At 17% APY, I will definitively move my liquidity somewhere else as the risk to hold the token is way too high.

3 Likes

Thanks for putting the hard work into this proposal. I have three comments that may help:

1). The rewards shouldn’t change weekly. With ETH gas fees being so high, it will not be attractive to LP unless there is visibility into a window. I believe Bancor does this well, adjusting or extending mining rewards by governance vote every 30 - 90 days depending on the pool.

2). I am concerned there’s not enough incentive to hold BAL given the proposed Tiers. Right now I restake 100% of my weekly rewards, primarily to BAL pair pools since I like the project and I’m interested in high yield. If you don’t need to hold BAL pairs to earn the highest rewards, and rewards are paid in BAL, I’m afraid the BAL will he dumped every week and reinvested into other Tier 1 pairs that don’t have similar risk profile. Given the size of the weekly BAL allocation, this would create a much greater weekly sell pressure. Again, Bancor does this well providing much higher yields on the BNT token than other forms of liquidity such as ETH, BTC and DAI.

3). Although I appreciate the contribution of the Ballers to the forum, I don’t understand why the Baller committee would control incentives. Why wouldn’t this be handled by the group we just voted on to handle the multisig? These are prominent high profile industry names that are well known and vetted publicly. I’d have a lot more confidence in knowing exactly who is on the “committee” rather than helpful discord handles. Or could this be handled by governance vote?

For context, I have roughly 70 ETH invested in Balancer and intend to hold the bulk of this position for years assuming the incentives continue to accrue in a predictable manner and remain greater than alternative projects. I initially was attracted to both for the high yield holding the native governance token and the time horizon for the LM rewards.

My first reaction to this proposal is that it’s well thought out, but appears to takes away the incentive to hold BAL, restake reward in BAL pools, and takes away the governance vote on liquidity mining rewards and instead delegates it to the Baller community (whom, as far as I can tell, operate under pseudonyms) The potential of reward tiers switching weekly would make me seriously consider investing elsewhere if there’s no long term visibility or predictability.

Hope this is helpful. I love the enthusiasm of the community and appreciate the Ballers for their support in the Discord channel (especially jnapier).

3 Likes

Hey - totally see your concern. Fortunately, this proposal makes adjusting the BAL rewards fairly flexible/modular–it’s ultimately up to the Ballers committee to optimize the amount of tiers the BAL/ETH pool will consume.

Just to give people an idea, here are some scenarios on the APYs for the BAL/ETH pool at ~$250M in liquidity :

Screen Shot 2021-04-07 at 7.01.39 PM

Importantly, these scenarios assume that ALL the liquidity would migrate to V2 and ALL of it would be staked into the BPT module (as well as total liquidity increasing slightly).

I’ll admit that BAL/ETH LPs may take a hit in the as more liquidity migrates to V2 and the committee fills out the slots with other pools but I think targeting 30-40% would be solid imo

Hope this helps!

2 Likes

I totally agree with stolos1,

I’ve been supporting the Balancer project since day one and my strategy has been the same: reinvest the weekly rewards in order to offset the weak performance of the token. This has worked ok and justified the risk of holding BAL tokens.
In my case, I have 0,5M$ invested which I will need to protect if this proposal goes into effect. Unfortunately, I have the impression this will be the case even if there is a low engagement on this forum.

I strongly believe, holders of the token should be rewarded in accordance with the risk profile of the project.

I participate on other project too and data suggests that those not dumping the rewards are mainly project holders. If rewards get diluted to incentivise other pools, that liquidity tends to increase sell pressure on the price token.

3 Likes

I’d support this proposal but the only hesitation that I would have with giving the Ballers committee full reign over the distribution is that everyone is going to have their own bags to shill. Given this should be offset by the ability of governance to remove and replace a baller for egregious voting but would be good to somehow make the discussion + reasoning public for the votes as well as some objective (if it’s possible) metric to determine if they are making good calls as a group .

2 Likes

hence why I think having ballers disclose their current bags whenever an update to the program happens might be smart. Could also indicate which ballers vote yes/no and if a baller has a bag that is being added, they could optionally abstain from the vote.

1 Like

I think there’s a lot of great thought put into the existing framework. It seems like the big risks are:
#1) reducing the incentive to reinvest weekly rewards into BAL pools, combined with high weekly inflation will create constant sell pressure on the BAL token.
#2) allowing Ballers a little too much control, which may be biased by personal holdings / limited visibility and input into critical decisions on strategic projects (especially Tier 1 and Tier 2)
#3) frequency of potential changes which causes lack of visibility and predictability for LPs (especially Tier 1 and Tier 2)

Some tweaks to consider that may help mitigate some concerns:

Tier 1 –

  • Is it problematic that only one of the proposed “paramount” uses BAL as the base pair?

  • Is yield likely to be cashed out every week + reinvested in the base pair (e.g. BAL rewards reinvested into ETH/WBTC)?

    • Since these are “paramount” pools, could we provide stricter rules to change them? For instance, effective for 180 days + auto-renews unless a Governance proposal submitted by the Ballers is voted to change one or more of the pools.

Tier 2 –

  • Since these are strategic pools, would it help to ensure that BAL token is tied in? For instance, Is it possible to limit these 10 pools to those that contain at least >33% BAL? Would this encourage reinvestment of BAL rewards into BAL liquidity?

  • Since these are “strategic” pools, it seems like we would want to allow for a medium length time duration…since the landscape changes so quickly, how about effective for 90 days and auto-renews unless a Governance proposal submitted by the Ballers is voted to change the 10 pools?

Tier 3 –

  • For these “promising” pools, what is the benefit of allowing weekly changes? This tier seems to make the most sense for the Ballers to have a little more control…maybe committee vote every 30 days effective on the 1st of the new month?

Mitigating Inflationary Risks: Staking / Burning

  • Also, is there possibly a 4th tier for people that want to stake BAL directly in a governance contract?

  • Any other creative ways to encourage people to reinvest BAL tokens rather than sell for other base pairs every week?

  • Are there any other potential benefits of holding the BAL token? Like profit distributions or a mechanism to burn tokens / reduce inflation?

Electing Ballers

  • Finally, what information will be disclosed about the Ballers (e.g. first/last name, photo, bio, twitter/social media links)?

  • Also, per the above suggestions, how do we ensure their “bags” are fully disclosed?

Hopefully this helps.

5 Likes

How can you guarantee those “ballers” disclose their holdings? Can we just trust their words? Anonymous people with a discord handle? Is this enough? Is this how a platform with $2B in TVL should manage rewards within the platform?

I defenitively trust, but I also want to verify. Hence, since this is impossible to do I don’t feel comfortable leaving some sort of “task force” to decide where funds need to be directed.

Do 0xLucas and coopahtroopa have any interest in supporting Balancer or they push for proposals for their personal benefit?

Govfactor
“Engagement factor”
BAL rewards deviated to other pools

are all proposals that come from them.
If I had no exposure or capital to invest in Balancer I would probably make the same moves to build a position without spending a dime and taking my risk down to near 0.

I do not want to accuse anyone but this has been in my mind for quite some time and I would like to have clear answers because since fire eyes (correct me if I’m wrong w names) came onboard I’ve noticed these changes.

3 Likes

I mean both Davis and I are ballers and we are actually trying to actively solve this problem (given I put up the problem and Davis offered a solution). It should indicate that we are at least taking it seriously. I’m not sure there’s ever going to be the ability to fully verify but happy to be proven wrong.

I suspect the move to have Ballers instead of the wider community voting is that it’s less susceptible to the exact same risk - i.e. some group of individuals/whales collude to move their bags into some other tier but don’t actually contribute to the long term of Balancer.

Another potential idea I have around mitigating this is potentially setting a mandate or some framework for Ballers to think around. So for example we want to incentivise pools that will most likely grow the trading volume of Balancer as a whole whilst taking into consideration strategic partnerships, liquidity locked up, potential of a protocol etc etc. The community can then judge the effectiveness of the group and individuals and vote out where individuals move away from the agreed mandate

Great conversation here.

It seems like the biggest pushback is a drop in BAL APY. BAL is a governance token, not a form of payment. It’s almost guaranteed that this shift would drop BAL APY’s in the short term, but I personally think that’s ok to help incentivize other pools to migrate and start using Balancer V2 out of the gate.

Just as BAL Staking was proposed to further reward BAL holders in V1, I can very much imagine a situation in which we analyze the amount of rewards (or in this case slots) BAL is receiving once 100% of rewards have migrated from V1 to V2.

The hard truth is that no migration process is going to be perfect, and this is a proposal that has been given a signifciant amount of time and though over the past few months.

These community members are spending more time on Balancer than anyone in the world. While the multisig signers have great signal, almost all are running their own companies and should not be tasked with overseeing something as important as BAL liquidity mining.

I hear the conerns about Ballers having too much power, however all of these actors have formed completely naturally and shown they are here for the right reasons.

I’d ask that everyone respect how nuanced a change of this magnitude is, and recognize that this is the first iteration, just as BAL V1 rewards were before the implementation of different factors.

I’m also eager to see how BAL tokenholders vote, and would look forward to seeing how the comments in this forum would translate to a Snapshot vote given how much higher voter turn out has been since the introduction of the govFactor.

1 Like

I like @tongnk suggestion to have a written mandate for the committee, and ways to measure intended outcomes. In the end, platform utilization will determine everyone’s success…the question is how the BAL token fits into the equation.

Also re: the ballers, totally understood that this group is dedicated and puts in tons of effort. I’m sorry if my comments implied distrust or disrespect. I think a certain level of due diligence is good to ensure that everyone’s incentives are aligned with stated goals, and that checks and balances are in place.

Thanks for considering my feedback, I’ll be quiet now :smiley:

1 Like

I wouldn’t say keep quiet - I personally believe it’s a good thing where people call out concerns since others are likely to have them as well :slight_smile:

6 Likes

BAL is a governance token, not a form of payment

I’m sorry if I’m meticulous but the proposal that is presented turns out to be a form of payment to attract liquidity, rather than validating and acknowledging the support of those who are in fact on this forum to discuss the best form to distribute the token. BAL tokens ARE a governance token AND a form of payment. If that wasn’t the case, why bother with rewards in the first place? Why call them rewards? Just give voting rights…
If the proposal goes ahead, I ask to clearly specify the expected APY for holding the token on the final proposal so that people can make an informed decision. Hopefully this time the majority will read instead to simply follow what the majority is voting for so they can get that extra 10%.

6 Likes

Very interesting and important discussion.
Personally I share most of the concerns expressed by @stolos1 and @zumzum.
Unfortunately I didn’t have the chance to follow the recent partnership with “FireEyes”, maybe there is already some discussion I might have missed, and would be curious to know more about it, what it entails and do @0xLucas and @Coopahtroopa have any interest in supporting Balancer?

3 Likes