Vote on whether or not the Balancer protocol should extend the govFactor and keep it in perpetuity for Balancer V1 liquidity mining.
Motivation
The govFactor was initially implemented as a trial to test voting incentives for the Balancer Protocol. The trial was successful as voter participation increased substantially across the board for all Snapshot Proposals.
For reference, the three most recent proposals prior to the govFactor vote averaged 91,000 BAL (~0.53% of circulating supply) compared to the three most recent proposals today which averaged 1.2M BAL (~7.0% of the circulating supply) in tokenholder participation.
With the upcoming transition to Balancer V2, there are no factors. Therefore, the govFactor will not be implemented in V2 liquidity mining.
This proposal aims to identify whether or not the Balancer protocol should keep the govFactor in perpetuity for V1 liquidity mining.
Specification
The govFactor is a 1.1x factor applied to the adjusted liquidity–the liquidity measured in USD terms after all other factors have been applied–of V1 LPs who voted on the most recent Snapshot proposal(s).
My considerations regarding the gov factor are the following
While I fully understand the benevolent intention to financially incentivise those participating in the voting process, the GOV factor has created a system that promotes voting but not community engagement.
Simply by looking at the number of addresses that have participated in voting in the past, can be deduced that those users who vote (1672 for the last vote on gas reimbursement) are not the same who have active participation in the community.
I’m deducing that the voting action does not, therefore, lead to a direct interest in improvements for Balancer but instead a mere personal economic interest.
I say this against my own interests, but I believe that the GOV factor produces an additional cost for the protocol that could be used in other sectors (marketing etc)
In a more general sense, I also have doubts about the democratic nature of the voting system where few addresses, with disproportionate amounts of BAL, can influence the direction of the vote in a completely arbitrary way.
For this reason, it would be interesting to explore a quadrating voting system but I’m not entirely sure what kind of priority a new voting protocol might have at the moment given the pace at which everything is moving.
After some thinking, I’m personally ok with extending the factor in V1. Originally, I was thinking our focus should be building around V2 and having an economic incentive to vote for V1 LPs becomes somewhat convoluting if we’re trying to put our focus on V2.
That said, it ultimately shouldn’t matter as there won’t be any incentive for LPs to stay on V1, let alone vote, as there won’t be any liquidity mining incentives anyways after the targeted ~8 week migration period is finished.
More broadly though I’m excited to see how we can build better governance incentives for V2–the idea of some sort of quadratic voting incentive that @zumzum mentioned is interesting to think about!