Some great discussion going on here, lots of good thoughts from everyone.
I agree on a number of things, namely:
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I it’s important that BAL pool APY’s remain solid, and greater than the majority of other pairs. Either that, or we need to think of some other kind of staking mechanism (e.g. a dBAL token which is the token eligible for a share of protocol “dividend” fees/other benefit which requires some kind of lock-up, although we’ve not voted in such fees yet) to ensure that V2’s launch isn’t accompanied by a sell-off, which wouldn’t reflect on the launch well.
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I think it’s right to have a way to add BAL rewards to particular high priority pools that are essential for ensuring a good trading experience, as suggested in the current plan. Same goes for being able to nimbly respond to new projects and attract users when particular tokens are “hot”.
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I share the concerns of those worried about “small asset” pools that will in effect lose their APYs as a result of this new program. I’m concerned that the new program optimises a bit too heavily towards traders rather than LPs. The thing that attracted me to Balancer initially was that I could pool any combination of tokens I wanted and then also earn BAL + fees for doing it. I get the impression that this is the same for a fair few LPs and I worry that losing this could make a usecase that attracted a lot of early users (who then went on to do other things with the protocol too) unprofitable.
I understand the argument that pools should be sustainable just based on fees, but IMO shorter term there is merit in attracting broader longtail liquidity, especially if we want to make the Balancer exchange a default destination people consider for all trades, like Uniswap currently enjoys. I think it’s worth emphasising that the reason lots of these pools are profitable on Uniswap is because it’s already this destination, which Balancer won’t immediately be.
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There’s definitely a trade-off around changing incentives too quickly pool-to-pool in the third tier. I’m not sure what’s best here, but I expect a compromise can be found in the 2-4 week minimum range.
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I’m a Baller myself so won’t get involved in discussing the committee idea too much in terms of for/against. I think a committee has pros e.g. it’s good in that it means decisions can be made quickly. Although it will be important that the process is seen as transparent, and absent of bad actors. All I will say is that Ballers to date were nominated for contributions to the community long before anything like this was proposed, and I have a lot of trust in everyone in the group currently to do right by Balancer.
Given the rewards are public in their very nature, there is also public accountability for all decisions the committee makes: if dodgy projects make it into rewards with flimsy justifications, it will be easy for the wider community to be able to tell. Where the larger risk for potential influence occurs is choosing between legitimate projects where it might be more like a coinflip what to include/not, although such a decision would at least be less significant in terms of its impact than scams etc, even in a worst case scenario where something bad happened. I think this is something to continue thinking about.
- I’d be very pro the idea of merging the two liquidity programs somehow, so e.g. half of BAL rewards being distributed as per the current system (perhaps removing balFactor), and the other half being prioritised as a “boost” for specific priority pools (which include a couple of BAL containing pools).
While I understand the desire to decentralise and also reduce the workload associated with this, this would reduce the risk of quickly losing the longtail of tokens that Balancer is currently quite strong for. It would also offer an opportunity to migrate fully to the new system at a later date (or otherwise transition slowly) in a lower risk way, after we’ve fully learned the pros/cons of the new program, which I’m sure won’t become fully evident until we see it running live.
I’d see this as a short term idea rather than long term solution, that at the very least ensures people can migrate their v1 pools to v2 and earn rewards like they’re used to being able to, and see the benefits of v2 before BAL rewards for the majority of pools aren’t incentivised. I worry that without an initial incentive like this in place that lots of people will just abandon their V1 pools and not migrate their liquidity.
It may even be worth thinking about delaying this “new” incentive program until after V2 is fully up-and-running, with the current reward system migrating like-for-like to V2 to get everyone to migrate their pools over, then transitioning towards this by slowly reducing the old style rewards & ramping up the new program in a way that reduces the risk of capital flight.
Anyway just my couple of cents. Very excited for V2 and the protocol being able to prioritise pool rewards better, will help in lots of ways I think.