Balancer

Motivation

Our Polygon deployment has been successful, and the liquidity mining committee is excited to continue working to grow its TVL, highlight Balancer’s unique features and add new pools & partnerships.

To facilitate further growth, the Liquidity Mining Committee proposes that we replace the tier structure on Polygon, so we can incentivise more pools and have greater flexibility with how we organise dual incentive partnerships with other projects. We will also use some of the “Flexible BAL” proposed to encourage Polygon LBPs to maintain their liquidity on Balancer after launch, rather than migrating to Quickswap or Sushi.

If the results are positive, we may wish to look at repeating this in the future on Arbitrum, and Ethereum main net.

A core benefit of introducing complete flexibility like this is that the liquidity mining committee can easily take a small amount of BAL away from multiple pools when it wishes to incentivise a new pool, rather than having to deprecate or reduce the rewards significantly from a very small number of pools, which tends to result in TVL flight.

Our experiments have suggested that pools which have their BAL rewards reduced slightly tend to retain liquidity better, presumably due to LPs being content to accept a small APY reduction without moving, where a large sudden drop triggers them searching for other opportunities to provide their liquidity. We believe this new approach utilising fully flexible BAL allocations should therefore help us to accelerate TVL growth on Polygon.

Following discussions with the Polygon team, if we demonstrate that we can significantly increase Polygon TVL, we will also be able to secure another round of MATIC rewards for our pools, helping to grow TVL even further.

Specification

If this proposal is approved, the liquidity mining tiers on Polygon would be replaced with a 25,000 BAL/week Flexible BAL allocation, that the liquidity mining can assign to pools as they see fit.

This flexible BAL allocation would be in addition to the 10,000 flexible BAL we’re already using across Ethereum & Arbitrum, rather than coming from that. So in effect, if this proposal passes, there’ll be a total of 35,000 flexible BAL per week across all networks we incentivise, with 25,000 of that carved out specifically for Polygon.

Dependencies

None.

Risk Assessment

We see no greater risk that Committee Members could 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.