Balancer

Motivation

We’re now a few months into the V2 Liquidity Mining Program, and everyone’s been learning what’s good about it, as well as where improvements could be made to make the most of every BAL token we allocate. Since the launch, we’ve added a new Tier 4 (following a governance vote), and introduced liquidity mining rewards on Polygon. We’re quickly gaining traction on Polygon, and created a lot of excitement around Balancer, which has been awesome.

Over the coming weeks, there’s plans for launching on Arbitrum (although we need to be mindful of spreading liquidity mining rewards too thin + liquidity fragmentation), new pool deployments, and a number of dual incentive partnerships.

While all very positive and exciting, these plans create additional pressure on the limited number of liquidity mining slots we have, and it’s becoming difficult to envisage how everything will fit in without further changes to the tiers and slots. We also have some potential partnerships with smaller projects where weekly BAL rewards as low as 100-500 BAL per pool may make sense, which the committee doesn’t currently have the power to grant (the smallest we currently have available to us is a Tier 4 slot, at 1,000 BAL per week).

Dual incentive partnerships with smaller projects are very helpful for long term relationship building, securing liquidity for good projects which will grow over time & marketing to new users.

Specification

If this proposal is approved, the Liquidity Mining Committee would be able to allocate a total of 10,000 BAL per week however it wants, outside of the tier system, to whichever networks & pools it decides make sense at the time, based on available opportunities.

This 10,000 BAL per week will be made available by removing 2xTier 2 slots, currently filled by USDC/WETH & USDT/WETH on Ethereum. There were already plans to deprecate these pools over time, as the Tier 1 WETH/DAI pool is planned to be replaced by a WETH/staBAL-3 pool when the batch relayer is ready.

This flexible BAL allocation will make it much easier for the committee to fine tune liquidity mining rewards, and phase pools in/out of rewards. For Polygon, Arbitrum, or any other network Balancer’s governance may decide to incentivise in the future, the committee will not be able to allocate more than the total BAL voted on by governance to that network across the new flexible BAL allocation and tiers. If flexible BAL is to be allocated to a network that would take it over its limit, a Tiered slot would need to be allocated back to Ethereum to keep it under.

As of the time of this proposal, a maximum of 25,000 BAL per week can be allocated to Polygon, and 25,000 BAL per week to Arbitrum. Governance may vote to change these limits in the future.

Dependencies

None. The frontend liquidity mining script has already been updated to be more flexible, such that we could allocate any amount of BAL to any pool.

Risk Assessment

We see no greater risk that Committee Members could “go rogue” and mis-manage rewards than they could with the current structure.

Governance would continue to have the power to halt the powers of the committee at any time, or remove members from the committee if it deemed such an action appropriate. The need for committee votes to pass changes each week would provide several days for governance to intervene, were such an intervention deemed necessary.