Hi everyone, I’m currently trying to learn the balancer protocol in depth and I haven’t found any explanation of what a “gauge” is and what its purpose is. Could you please give me an explanation or a link to it? Because this term is still confusing to me.
In the context of the Balancer protocol, a “gauge” typically refers to a mechanism that measures and represents the relative weights of different assets in a liquidity pool. Liquidity pools in decentralized finance (DeFi) platforms like Balancer are composed of multiple assets, and the gauge helps maintain a desired balance among these assets.
Here’s a breakdown of how gauges work in the Balancer protocol:
- Asset Weights: In a Balancer pool, each asset has a specific weight assigned to it. The weight determines the proportion of that asset in the pool relative to others. For example, if there are two assets, A and B, with weights 50% and 50%, it means that half of the liquidity pool’s value is in asset A and the other half in asset B.
- Gauges as Controllers: Gauges act as controllers that adjust the weights of assets within the pool over time. The purpose is to encourage liquidity providers to maintain a desired balance. If one asset becomes over- or under-represented in the pool, the gauge adjusts the weights to bring it back to the target balance.
- Incentives: Gauges are often associated with liquidity mining programs or yield farming. Users who provide liquidity to the Balancer pool receive governance tokens or other rewards. Gauges play a role in determining how these rewards are distributed based on the balance of assets in the liquidity pool.
- Decentralized Governance: Balancer is a decentralized protocol, and the governance of the gauges and associated parameters is often determined by the community of token holders. Decisions about changes to weights, incentives, and other protocol parameters are made through a decentralized governance process.
Hey @typicalHuman, good question. Deepsouls response is partly correct, but also confuses some terms, not sure if ChatGPT may have been used there… A gauge doesn’t balance the weights of the pool, that is the role of the specific pool type / AMM / swap logic the pool uses.
In simple terms, a ‘Gauge’ is a contract that allows for streaming BAL emissions to a Liquidity Pool. Pools do not automatically have a gauge, they must be approved via governance. This means that for any liquidity pool to receive BAL incentives, external protocols/DAOs must propose a gauge and Balancer Governance must approve. So, how do pools receive BAL incentives? That comes down to the Gauge Vote. The Gauge ‘Vote’ system has become an industry-wide standard for Decentralised Exchanges, allowing governance token holders of the protocol (veBAL for Balancer) to vote and dictate which LPs the DEX’s native token emissions flow to. The distribution and direction of BAL are decided on a weekly cadence by this vote.
Also worth noting that asking in the discord is the best place for general questions.
You’re right, but I just thought it would be good to put this question out in the open as I couldn’t find anything on the forum or in the docs, so maybe this question would be helpful to others.
In very short.
A gauge is a smart contract that you can stake BPTs in, and receive streams of rewards.
It can stream any direct incentive paid in by a distributor after some configuration by the Balancer Maxis.
It can also be added to the Gauge Controller with a governance vote, at which point veBAL can vote for it triggering the streaming of BAL incentives.