Balancer – a non-custodial portfolio manager, liquidity provider, and price sensor – has just announced the release of BAL – a native governance token that rewards users for providing liquidity to Balancer Pools.
We're excited to share that starting shortly (days, not weeks), Balancer liquidity providers will get $BAL governance tokens! ⚖️🌊⛏️🚀
To learn more:https://t.co/t18nEQR6rU
— Balancer Labs (@BalancerLabs) May 15, 2020
Now, with the addition of BAL, there’s not only an incentive for pool creators to collect pool swap fees, but also earn governance tokens for a term coined “liquidity mining”.
“We believe that these protocol users should get to participate early on in deciding how the protocol evolves. This is why we are proposing to implement the concept of liquidity mining: Balancer protocol would distribute BALs to liquidity providers, starting imminently”
What’s To Know
The total supply of BAL will be capped at 100M token spilt as follows:
- 25M to founders, core devs, advisors and investors, all subject to vesting periods.
- 75M distributed to the community through liquidity mining
As for how those community tokens enter the circulating supply, 145,000 BAL will be issued per week, coming out to roughly 7.5M per year. What’s interesting to note is that while the first year distributions are relatively fixed, Balancer has stated that future distribution will ultimately be decided by BAL holders.
Seeing as the seed price of BAL was sold at $0.60/token, this makes the max supply currently valued at a modest $60M, with the expected first-year supply of 32.5M BAL ~$19.5M at the time of writing.
For reference, at a fully diluted supply, this would place BAL in the top 10 of the DeFi Market Cap, signalling that should the protocol actually accrue volume (and fees) as expected, that there is room for growth for the sector rising asset management DEX.
As for how BAL is earned, all liquidity providers will receive BAL so long as a USD price can be extracted from CoinGecko for at least 2 tokens present in their liquidity pools. Balancer is also implementing a feeFactor which looks to level out liquidity mining across all pools, regardless of their underlying pool swap fee.
Valuing Governance Tokens
With the recent launch of the UMA governance token, COMP and Aave’s upcoming governance migration, prominent community members have pointed out that it’s interesting to consider how governance tokens should be properly valued. Especially with new frameworks like the SAFG rolling out which allows users to earn governance tokens with no economic value (for now) it’s interesting to consider what level of demand these protocols will see for their native tokens.
Governance is increasingly important as new base layer and protocol networks launch.
Governance tokens are being positioned as monetization for investors in zero-margin #DeFi products.
Can we value them?
— Jake Brukhman (@jbrukh) May 15, 2020
More so as it relates to Balancer, with the upcoming launch of Uniswap V2 it’s interesting to consider whether or not the ability to earn native tokens for providing liquidity will outweigh a desire to collect direct protocol fees.
btw, i find balancer vastly superior over uniswap v2, so at least if we're talking about non stable liquidity provision, they have very decent odds
curve has the monopoly on stableswaps unless anyone else is coming up with amp / virtual liquidityhttps://t.co/AXLlXMDYIN
— 찌 G 跻 じ ⚡️ 🔑 (@DegenSpartan) May 15, 2020
If one thing is for certain, DeFi is slowly reducing the barriers to maximum liquidity, especially with the ability to provide capital in the form of one asset, instead of having to split it into two (like how Uniswap works today). While it’s unclear who the biggest benefactor of this added liquidity will be, we can only assume that DeFi products at large stand to benefit from deeper, permissionless liquidity in the coming years.
Cooper is the Editor of DeFi Rate and a contributor to leading DeFi outlets like the Defiant and Bankless. He is active in the DAO ecosystem through projects like MetaCartel and Raid Guild where he seeks to incubate governance models and grassroots community development. He is an ambassador of Set Protocol and the Director of Fitzner Blockchain Consulting where he authors a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.