As part of the veBAL tokenomics upgrade 75% of protocol revenues are to be paid out to veBAL holders in bb-a-USD. An undesirable side effect of this is the protocol liquidating a significant amount of BAL tokens collected as fees. This proposal suggests that these BAL tokens should be paid out to veBAL holders directly on top of the 10% of BAL emissions they receive.
Motivation
It was noted in the veBAL proposal that there would need to be some consolidation of the tokens collected before paying those fees out to veBAL holders:
It was decided that protocol fees should be paid out in the bb-a-USD token, however we can see that a significant portion of the protocol fees collected recently were in the form of BAL tokens.
As we want to incentivise veBAL holders to reinvest into their veBAL position, it’s counterproductive to preemptively sell these tokens into stablecoins and it would instead be preferable to pay out BAL directly.
The addition of BAL as a token for which to pay out protocol fees is unique in that 10% of BAL emissions are reserved for veBAL holders and these funds are distributed through the same mechanism as the protocol fees. It then causes no extra complexity or gas costs for veBAL holders to pay out a portion of the protocol fees in BAL tokens.
Specification
The Treasury subDAO shall exclude any BAL collected from being liquidated to bb-a-USD and use it to supplement the existing BAL emissions paid to veBAL holders.
Any future tokens collected which are primarily paired against BAL (e.g. auraBAL by way of the 80/20 BPT, etc.) would be liquidated to BAL rather than bb-a-USD.
We’re planning on using the FeeDistributor contract to distribute both BAL and bb-a-USD which has a claimTokens function which allows a user to claim an array of tokens in a single transaction.
I’m expecting that veBAL holders would passing both BAL and bb-a-USD addresses as inputs to claim emissions and protocol fees in the same transaction anyway so it would be no change on their side.
BAL for BAL fees collected is a no-brainer, I think we should go even a step further and consolidate and distribute all fees either in BAL or LiqBAL*. So, what was the decision behind distributing fees in bbaUSD for all pools? Was this a conscious decision or did Balancer just follow the Curve 3pool model?
Distributing the fees in BAL creates buy pressure. Distributing fees in LiqBAL adds liquidity depth where users don’t claim for a while or where they don’t care to cash out fee generated and makes it easier for them to reinvest it back into the protocol by locking their LiqBAL into veBAL.
*by LiquidBAL I’m referring to 80/20 BAL/WETH BPT. It’s becoming a bit tiring to write that whole thing out – it needs its own name.
In terms of the decision to go with bbaUSD it was two-fold AFAIK, 1) to make sure there was deep liquidity in one of main trading pairs, as support for the rest of the platform [assuming a good number of people didn’t immediately withdraw] 2) on the execution side, where we will need to swap from many other tokens, it is safe to assume your lowest slippage on average will take place when swapping into a stable.
In order to get veBAL you have to lock the BAL BPT so effect of adding liquidity was already baked in there. However nothing is to be said that bbaUSD has to be the final outcome.
Another positive of having it be bbaUSD is that the worth of your rewards are a lot more dependable if you arent going to claim straight away. I suppose you could take that point in either direction as something non stable could go up 100% in a year but it is more about consistent price to me.
@TomFrench excellent catch! This idea not only increases simplicity in regards to managing/paying out BAL collected but better supports the long-term circulation of BAL tokens.
My interpretation of the “rules” are that the treasury is free to consolidate the fees in whatever way makes the most sense. That is, the treasury doesn’t have to swap 75% of each token for bb-a-USD before doing the distribution, it simply has to pay out 75% of the revenues to veBAL holders.
So there’s no need to sell BAL when it only accounts for ~20% of the revenues according to the spreadsheet. I always assumed the treasury would want to sell all of the other tokens for bb-a-USD for distribution, keep as much of the BAL as possible, pair it with ETH and lock it as veBAL to participate in the BAL Battles.
With that in mind, I suggest we expand the list of tokens in which protocol fees are distributed, so as to include BAL in the list. But still leave the decision up to the subDAO until we decide to automate the process.
Hi Markus, I won’t necessarily get into the specifics of what the treasury’s plan is for its 25% here, however in the snapshot vote for allowing the treasury to invest protocol fees it clearly states at the bottom of the proposal the following:
No matter the outcome, Treasury subDAO will still be sweeping protocol fees and converting 75% to bbaUSD to pay out to veBAL until an automated solution is put in place.
for that reason i believe a proposal would need to be voted on to allow for distribution of BAL or any other tokens. so either this proposal is more open to say, “granting the treasury DAO the power to decide the best ratio of assets to distribute” or just “Distribute protocol fees in BAL where appropriate” as Tom has titled the proposal. i think the latter provides the best outcome for now.
BAL distribution being discussed in this proposal is solely part of the 75% of protocol fees earmarked for veBAL holders. the 10% BAL emissions quoted here are no longer locked in at a 10% rate and rather voted on each week just like any other gauge, therefore the BAL distributed from protocol fees could be in addition to anywhere from 0% to 10% of the BAL coming from the gauge voting
