Thanks for posting this up - I’m pretty excited to finally get this on the road!
Very excited to see this team and this program in action!
Adding strong technical skills/background to the team will be an absolute must in order for the committee to function self-sufficiently.
I’m new to managing grants but will do whatever I can to make this a success. Luuk, tongnk, and Zeb have shown the initiative to get this off the ground which is great to see. Looking forward to working on this with everyone.
good proposal. Nice and clean.
I have only some questions: you mentioned several times “Balancer Ecosystem”. While I’m not familiar with other grants and the success those programs had within other protocols, I would love if you could clarify what the ultimate goal is. Improve somehow the Balancer platform, expand the number of applications/projects that can interact with balancer (such as hammer.finance) or create something totally independent under the Balancer umbrella? or any combination of the three? Because when I read the word “ecosystem” I immediately think of the various Yearn/Sushi and so on partnerships.
You have mentioned the overreliance on the BLab core team, would you like to see less intervention from them? Again, I’m trying to understand how the reliance on BLab has hampered the support of grantees.
Also, let’s say the DAO support a specific project that actually becomes successful. Now, you are saying that such a project will remain close to the Balancer ecosystem because of the mentoring?
The Grants DAO will mentor these projects, which will keep these projects close to the Balancer Ecosystem
Is that it? Or will you ask in exchange for something more tangible so Balancer can actually have some sort of control? (tokens/shares/partnerships) What I mean is, we are giving away grants (tangible) and mentoring (non tangible) for what exactly? I think this part could be expanded in my humble opinion. Just to clarify once the grant is given, what upside is there for Balancer itself. I hope I’ve been clear enough on this.
As far as my understanding is, it’s to fund projects that will grow the TVL on Balancer. Ecosystem in this context is just projects using Balancer. We’ve kept it fairly broad to start with as this is going to be a learning process - if we restricted it I think we would learn far less.
Basically Jeremy is a one man team and can’t deal with the massive inflow. So having something not reliant on BLabs should help with reducing his workload as well as getting us towards decentralisation.
I don’t think so. I think we will need further initiatives in the future to help with the retention problem. But to start with we need to build the funnel out and be helpful. There’s a lot of competition right now with trying to attract builders and we need to stay competitive
I’d like to to raise the point about currency denomination for grants.
I strongly believe that denominating grants in BAL is a must, since each round of grants will have a set BAL budget and the committee must know with certainty how much it is going to pay for each grant project, without the risk of mismanaging the budget due to uncertainty of the future price of BAL. This is a volatile market and it doesn’t make sense to commit to a USD price and then settle it in BAL at a future time, since you wouldn’t even know if you’re going to be able to pay the grant. Agreeing initially to a USD value is a good approach, but when the grant deal is solidified between both sides, it needs to be in BAL.
In my interactions with grant project teams over the past year, I can’t recall one team expressing dissatisfaction with this approach. And we should not assume that the teams that applied for grants already knew about this policy and self-selected accordingly, because this policy was not shared publicly anywhere, and AFAIK, the teams found out about it while speaking with me. If it was a problem, I would think someone would at least ask if we could do it differently.
Any feedback to the contrary is welcome. If i’m wrong please point out why.
Will add the comment I added in the Google Doc, would be good to hear others thoughts on this too.
Mainly that I think being able to denominate in USD is a positive, and what I’m unsure on is why if we were issuing a grant in USD the committee couldn’t sell the BAL for the appropriate amount of USD when the grant is agreed?
That provides the committee with the flexibility to offer both, without creating budget problems.
I suspect that when it’s widely marketed there’ll be a mixture of providers/builders, and some which have employees would deem a grant denominated in BAL difficult for a large project, as they have fiat costs & get forced into speculating on BAL. I think Balancer should be making it really easy for grantees to get involved and this reduces something that could be a blocker for some teams.
Positive update: We have most likely found a technical committee member that has multiple years of smart contract development experience, worked with Balancer V1 and V2, and has received a BAL grant in the past. This person will most likely participate under a pseudonym. More details will be provided soon!
I agree with @immutbl on using only BAL as grant currency. I also think the grants committee should not sell BAL to give USD to grantees. This could create risks relative to taxation. To avoid any such uncertainties, the DAO should only provide grants in BAL (even if the committee calculates its value in USD at the moment the grant is awarded).
If the team needs to fund its operations and needs USD, a portion of the grant should be given in liquid BAL (instead of vested BPT) so that the team can sell the BAL for USD (then it’s their problem to figure out taxation relative to the jurisdiction they are operating under.
I believe the current plan is to give all grants in non-vested BAL
Didn’t think of the tax issue, I guess dispersing BAL isn’t treated as a trade, whereas selling before distributing could realise a profit in effect for the committee temporarily?
I think all the grants are unlocked BAL, my only concern is e.g. say you have a year long project and someone wants to commit to building it, BAL is then released in tranche milestones: BAL could fluctuate in value a lot between those milestones, from the team’s perspective, although I suppose you could grant more BAL to top it up if there was a problematic drop and it was a core project. There are ways to mitigate this with how the tranches are designed too, it just potentially means putting more trust in a team, i.e. supplying some BAL v. early on.
I guess also depends on whether the grant is more an incentive to build something they were going to build, but on Balancer (here BAL is going to be fine), or the BAL is actually required to pay wages for the team as well. It’s teams like the latter that don’t have any other funding where it could present challenges, but I don’t really have a sense of how much of the potential grantee pool that would be.
I also suspect that while BAL will be easy to convince people on when the market is trending positive, it may be harder in sustained market-wide bear conditions. Hoping that won’t be the case of course, and I suppose it could be re-visited if for some reason it became problematic. Worth noting that experience of the last year of grants has been through a bull market until v. recent though, and grant dynamics could alter as a result if that changes (not just for Balancer but all projects).
So I know this is a contentious point but this one is one I’m willing to fight for - paying out grants in BAL denominated in USD and not just BAL. Just to clarify, what I was envisioning for this is as follows: say a grantee asks for 20K USD, we may split it up into 2 milestones of 10K USD each.
Say they complete the first milestone we would take the 7 day TWAP price of BAL and pay it out in BAL, so 10k / BAL price. When second milestone is done we would do the same thing. Let’s go through 2 scenarios why:
- BAL appreciates significantly: grantees are happy in this case but community may feel that they overpaid for specific grants. Especially if delivery was a significant time after the approval of the grants.
- BAL depreciates significantly: grantees have basically have their value significantly reduced. They may not complain to us directly- it creates a very awkward conversation in which most people would want to avoid. So individuals may simply just not choose to build again for us or pick any other competing program that has significantly better terms. The key point here is that the grantee is taking on pricing risk as part of the application
Potentially we can have some input from @immutbl about this from a Balancer perspective but from my research + talking to people the major programs see 2 types of people that apply:
- People who want to build on top of the protocol for the long term. Either building a project of their own or want to get into some form of DAO related employment.
- Teams/people who want to use grants to bootstrap their project or use it to get some more funds
I would argue that (2) is equally as important as (1) in this case. Yes they may churn out but we need to remember that the goal here is to build an ecosystem of builders who will help us create a DAO. If you create a good experience for builders they will recommend the program to other builders they know, even if they ultimately churn.
Why USD Denominated
If we take into account the users above we should now zoom out and try to compare our grant program - we need to understand that we are competing for talent in an already small DeFi ecosystem.
If we purely denominate in BAL as at the time of approval then as I pointed above grantees take price risk on BAL. If we add in the fact that currently there is a significant vesting period of 12 months (another item we are proposing to eliminate) then you almost have adverse selection - teams who know their value and may fall into category (2) will simply just build for someone else. Why take the price risk over a significant period of time?
Indeed, perfect example is a dev agency that does client work, has a good idea for a project that would be built on Balancer. They’re a team that all carry salaries, and to work on the Balancer project is to take time away from billable work.
Such a team is going to have a very strong preference for fiat denomination, because they have high fiat costs that need to be paid. Being rewarded in BAL could mean they pursue something else where they can get fiat denomination to mitigate risk. That’s a project that doesn’t get built on Balancer as a result. Perhaps could argue we don’t want teams like that, but I think that’s a mistake if we want to grow the ecosystem (introduces talent to Balancer, as well as the benefits of what’s built).
I understand why it’s easier for Balancer to only denominate in BAL, but IMO we should be optimising for the experience of grantees to build the most widely respected program possible. Long term locked BAL or future tranched BAL that’s fixed is going to be treated as a bonus that’s heavily discounted by many working out whether they should build in an attempt to mitigate risk, and could create problems if market moves in either direction as @tongnk has said.
Why does the Bal need to be sold to give USD to grantees when the tokens can be deposited into Aave and a stablecoin loan can be drawn from the collateral? The 55% LTV they offer on Bal tokens is not the most efficient, however there is upside of 8.5% APY on the deposited tokens, and using tokens as collateral for a stablecoin loan carries less taxation risk than selling. Also when a loan is drawn on the tokens instead of selling them, there is no downward price pressure on the price. Maybe this has already been thought of, but I figured to throw it out there.
Thanks guys for your good arguments about using USD denominated grants.
The only problem that doesn’t seem to be solved IMO is the risk of promising something that cannot be kept. If you promise a grant of 100k USD and BAL goes to 1USD then the grants committee cannot pay the grant. What would you do to avoid this risk?
Depending on how comfortable the community is with AAVE’s smart contract security, I propose the treasury could deposit enough tokens into the BAL market such that a loan of $630,000 (25,000 tokens * $25.25 per token) can be taken, while having the loan remaining healthy even if the price of BAL goes to $1. The treasury can then use the Delegate Credit functionality that AAVE has to allow the grantsDAO to borrow the amount of funds desired for the program. At first glance it may seem as thought a far larger amount of BAL than the 25,000 is needed to create such a scenario (to borrow $630,000 at 0.55 LTV for a token that is $1, roughly 1,145,500 tokens would be required), however AAVE’s functionality can be used to hedge the tokens allocated in a way that 102,500 BAL (10x fewer than 1,145,500) would be required as initial collateral to draw this loan and not be liquidated even if the price were to fall all the way to $1.
Step 1, deposit 102,500 BAL tokens to AAVE and borrow $1,423,000 USDC with a 55% LTV
Step 2a, take the $1,423,000 USDC borrowed from step 1 and deposit back into AAVE, then with the 80% LTV that USDC offers borrow 45,000 BAL and sell on the market for $910,000.
Step 2b, take the $910,000 USDC from market selling the 45,000 tokens in step 2a and deposit back into AAVE, then borrow 36,000 BAL and sell on the market for $725,000.
Step 2c, take the $725,000,000 USDC from market selling the 36,000 tokens in step 2c and deposit back into AAVE, then borrow 21,500 BAL and sell on the market for $550,000, this is not the max loan amount that can be taken, $185,000 credit is still able to be borrowed.
Step 2d, take the $545,000 and deposit to AAVE, the treasury has $630,000 of credit that can be delegated to the grants DAO. The treasury has 102,500 tokens BAL deposited in AAVE and a debt of 102,500 BAL, with $4,200,000 of USDC deposited, a completely delta neutral position, and the Grants DAO can draw a $630,000 and the treasury will not be liquidated even if the price drops all the way to $1.
Key points: With this method the grantsDAO can issue a grant priced in USD with 100% certainty that no matter how far the market falls it can keep its promise, the treasury does not sell its own BAL tokens directly triggering a potentially taxable event. Also keep in mind that 102,500 tokens will not be allocated to the grants DAO directly, this is the amount required for the Treasury to hedge risk and protect itself from liquidation if a black swan event sends the price to $1.
hi @alexclarkbarry :
In step one, you calculated the selling of 45K BAL for 910,000USDC instead of 1,150,000USDC.
Same as in step two (selling 36K BAL for 725,000usdc instead of 915,000USDC). The difference is around 420,000USD. Did I miss something?
Apart from this detail, a transaction involving the deposit and loan of 102,000BAL would incur a net underlying interest (APY-compounded) of 14% (variable). The cost of this operation at a constant BAL price would mean paying $200,000 semiannual in interest on the BAL token only, to which USDC interest should be added (a variable interest I suppose, which would bring considerations regarding risk management - fixed we are at over 10%).
I think we should vote on this proposal already. It was very well thought through and will add great value to Balancer Protocol.
There doesn’t seem to be consensus on any specific changes. It’s normal for some people to have different suggestions but I haven’t seen anything being brought up that was a no-brainer that everyone agreed on and should be changed.
We need to start giving grants to projects willing to build cool stuff on V2 soon. Two concrete examples IMO are PowerPool and Indexed Finance. I’d bet there are a lot more waiting on the sidelines that are watching and waiting for a precedent before they also apply for a grant.
Is there anything blocking this proposal to be brought to snapshot this weekend?
Just for those that didn’t see it, the vote is on snapshot Snapshot
Here is another option that is worth checking out to boost Balancer DAO.
Nice read from a DAO unrelated to UMA.
It is written about one of UMA’s new DAO treasury diversification tools, the Range token. Everyone here knows Im big on UMA as well as BAL. I would be doing a disservice if I did not mention an interest-free, no possibility of liquidation, loan specifically for DAO’s.
They seem to be transforming and etching out a DAO over there and now developing tools for DAO’s . Seen a lot of interest lately. Plus, UMA is doing AMA’S with a bunch of DAO’s on their Youtube channel and it sounds like everyone is taking advantage of it.
I heard interest-free…lol.
Just wanted to share an alt idea I’ve heard a lot about and could be a winner.
Coming out with some ways to reward LP’s on Polygon so that should be something to check out when it gets here too.