Balancer V2 Liquidity Mining
After discussions with the community on the Forum and Discord, we feel there’s sufficient consensus on the prospective Balancer V2 liquidity mining program to make a formal proposal.
In V1 liquidity mining, each LP receives their proportional share of the weekly 145,000 BAL distribution, according to their adjusted liquidity (i.e. after all adjusting factors are applied to their raw liquidity in USD terms).
In V2 liquidity mining, specific pools will each get a fixed amount of BAL per week, and LPs who stake their BPTs will get their proportional share in those eligible pools.
With that in mind, there will be 3 different liquidity mining tiers for eligible pools:
- Tier 1 (T1): 15,000 BAL (4 slots, total of 60k BAL per week) - Pools where strong liquidity is paramount, e.g. for acting as hubs by connecting liquidity in order routing.
- Tier 2 (T2): 5,000 BAL (10 slots, total of 50k BAL per week) - Strategic pools, e.g. having strong potential for high volume given high liquidity.
- Tier 3 (T3): 2,500 BAL (14 slots, total of 35k BAL per week) - Promising pools, e.g. containing newly launched tokens or small cap projects (unproven potential for high volume).
It’s important to highlight that more than one slot may be allocated to a single pool. As an example: If the 80/20 BAL/ETH pool has a targeted allocation of 25,000 BAL per week, then it may consume one T1 slot along with two T2 slots.
Transition from V1 to V2 Mining
The transition from Balancer V1 liquidity mining to V2 will be gradual and may take several weeks. As an example, it could start with only a few of the tier 3 slots being filled by the main V2 pools, with new slots being "activated’’ on a weekly basis.
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.
Eligible V2 liquidity mining pools and their BAL allocation will be decided weekly by a committee of Ballers according to community input and their own judgement, having the long term benefit of the protocol in mind.
This Baller committee acts as the first step in the progressive decentralization of Balancer. The goals in using a small 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. Gauntlet, Dan Elitzer and Cooper Turley have already agreed to participate on these meetings.
Unless otherwise expressed by BAL governance, the transition period will take no longer than 8 weeks from the start of V2 mining and will end with the four T1 slots being used by the following pools:
- 80/20 BAL/ETH, dynamic fee
- 60/40 ETH/DAI, dynamic fee (may have different weights)
- 50/50 ETH/WBTC, dynamic fee
- DAI/USDC/USDT stable pool
Generally speaking, T2 & T3 slots are meant to be more flexible. These tiers may be updated more frequently even after the transition period, without the need of changes being blessed by BAL governance.
Keeping govFactor for V1 mining
The govFactor proposal approved by BAL governance on 2020/12/20 created that factor as an experiment that would initially last for 3 months. This current proposal extends the application of the govFactor indefinitely, therefore keeping it permanent. As Balancer V2 mining isn’t compatible with factors, the govFactor will only apply to the portion of liquidity mining that still remains on Balancer V1.
More about Ballers
Ballers are core community members who have consistently contributed to the Balancer ecosystem. Some high level examples include:
- Actively participating in key BAL governance topics
- Helping educate and inform other community members
- Creating tools that ease/enhance the UX for Balancer users
The initial cohort of Ballers was elected in Q4/2020 by individuals from Balancer Labs who were closely following community discussions. There are currently 10 Ballers who can all be identified by the “Baller” tag in the official Balancer Discord.
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 however constantly assess how participative Ballers are and how good their decisions on the allocation of liquidity mining slots are.
Liquidity Mining in Balancer V2 will operate in 3 tiers with selected pools strategically assigned by the Ballers committee based on demand for liquidity. It’s important to note that only select pools will be eligible for liquidity mining allocations.
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 between both Balancer V1 and V2.
- Yes, in favor of the above framework
- No, against the above framework