Much appreciated for everyone’s feedback!
This has been a healthy discussion and we hope to address everyone’s concerns. From our perspective, there were two main points of pushback:
- Yields for BAL LPs under this proposal will be too low
- Ballers have too much control over the liquidity mining.
After discussing internally along with some of the folks at Balancer Labs, we want to amend the original proposal to address the above concerns. Given that the proposal already has enough voting participation on the poll in favor “for” (70% in favor, 30% against), **the proposal outlined below will move to a formal Snapshot vote on Friday, April 15th in order to prepare for the upcoming launch of V2.
We hope that everyone participates and weighs in their sentiment on-chain.
We’d also like to highlight that no members of FireEyes DAO will participate in the committee as a result of the feedback.
I’d also like to highlight, as mentioned on Bakomoto’s feedback, that this system can always be changed in the future via normal governance processes if the community deems it unfit after its implementation (assuming it passes). That’s the beauty of open, decentralized governance!
Lastly, the section surrounding the govFactor has been removed and made into its own proposal. You can view, comment, and vote on it here.
Here’s the official proposal that will be featured on Snapshot:
Motivation
Crypto moves fast and the AMM space is as competitive as ever. In order to stay relevant and to attract significant liquidity, Balancer needs to implement a flexible Liquidity Mining Program which targets high priority pools and can respond quickly to changing market conditions.
Unfortunately, this can result in significant overhead for normal BAL governance. Constantly weighing in, voting, and checking the forums on a daily basis can be a hassle for most BAL holders.
As a result, this proposes having a dedicated committee of core members to the Balancer protocol to lead this charge and ensure that the protocol is always incentivizing the right pools, at the right time.
Specification
Balancer V2 Liquidity mining incentives will operate in three tiers governed by a combination of BAL governance and the Ballers Committee.
Tier 1 will be voted on by BAL governance while Tier 2 and Tier 3 are voted on by the Ballers committee.
All Balancer community members will retain the right to make proposals and signal support for T2 & T3 Liquidity Mining inclusion. The Ballers Committe will act as a liason between community sentiment and formal changes to the program. Discussions on Liquidity Mining inclusion will be open for all community members on both Discord and the Forum.
The Ballers Committee will have no control over the Tier 1 slots. Instead, they will be governed by normal BAL governance which will be put up for vote every 12 weeks. Additionally, all decisons made by the Ballers Committee (along with voting addresses) will be made public for everyone to see prior to implementation.
In order to accomodate for sufficient yield to attract liquidity on certain pools, more than one slot may be allocated to a single pool by consuming additional T2 and T3 slots as voted on by the committee.
The timing for changes on each tier outlined above is a guideline–BAL governance and the Ballers Committee will always have the right to change tiers if the market conditions deem it necessary (examples include rug pulls, bugs, and other issues which would require quick response by governance).
BAL/ETH Pool
In order to mitigate the reduction in yields for the BAL/ETH pair, the Ballers committee will aim to target the existing returns in V1 (60-70% APY) through the use of additional T2 & T3 slots.
It’s important to highlight that there are a significant amount of variables that will affect the BAL/ETH APY (as well as all other pools). This includes amount of liquidity migrated during the transition, amount staked, tiers consumed, etc.
With all those variables, The Ballers Committee will be responsible for trying to ensure that the APY on the BAL/ETH pool are in line with the above.
Transition from V1 to V2 Mining
The transition from Balancer V1 liquidity mining to V2 will be gradual and take several weeks. This will start with only a few of the Tier 3 (T3) and Tier 2 (T2) slots being filled by top priority pools, with new slots being "activated’’ on a rolling basis, targeting every week.
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.
The transition period will aim to take roughly 8 weeks from the start of V2 mining. At the end of the transition period, Tier 1 slots will be allocated to these pools:
- 80/20 BAL/ETH, dynamic fee
- 60/40 ETH/DAI, dynamic fee
- 50/50 ETH/WBTC, dynamic fee
- DAI/USDC/USDT stable pool
Ballers Committe
The selection of Tier 2 and Tier 3 Liquidity Mining Pools will discussed on a weekly basis according to community input and signal, and voted on formally by the Ballers Commmitee.
The Ballers Committe is open to everyone. Any engaged individuals in the community can be elected by fellow community members to join the committee. More on this below.
The goal of using the Ballers 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. That said, they will have no formal voting rights on Snapshot.
Additional Background on Ballers
Ballers are active members of the community that have gone above and beyond by contributing significant resources and time to the Balancer Protocol. There are currently 10 Ballers in the community as assigned by their tag on Discord.
Ballers are currently elected by the team at Balancer Labs, however, there intends to be a formal governance process by BAL holders surrounding the election of future Ballers and the encompassing committee.
With that, 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 constantly assess how participative Ballers are and how good their decisions on the allocation of liquidity mining slots are.
Drawbacks
- The Ballers Committee is a small group of individuals and can poses centralization risks, collusion, etc. It’s important to note that BAL governance always retains the right to remove Ballers from their position. In addition, becoming a Baller is a selective process and requires a significant amount dedication to the protocol–meaning they’re extremely aligned with the success of Balancer!
- This structure would eliminate liquidity incentives for the long-tail of pools. This is true, however, the upgrade to Balancer V2 drastically increases gas efficiency and creates a natural incentive for project teams to drive liquidity to Balancer given its competitive conditions for trading, namely lower gas costs. Importantly, some competitors don’t offer liquidity incentives at all and still have sufficient liquidity for the long-tail of assets. We believe that V2’s upgrade is substantial enough to compete with this market dynamic.
Summary
Balancer V2 liquidity mining will operate in 3 tiers. Tier 1 will be voted on by governance on a recurring basis while Tier 2 and Tier 3 pools will be strategically assigned by the Ballers Committee based on community sentiment.
It’s important to highlight that certain pools may be allocated more than one slot by the committee. For instance, the BAL/ETH pool may be elected multiple slots in order for the APY to tentatively match the BAL/ETH APY on V1 as mentioned.
All community members will always have the ability to signal their support for liquidity mining inclusion for T2 and T3 pools in order to guide the committee.
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 spread across both Balancer V1 and V2.