SECTION 1: APPLICANT INFORMATION
Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name:
Balancer DAO
Project Name:
Balancer
Project Description:
Balancer is an AMM which has been at the forefront of DeFi launching its v1 in early 2020, being in Arbitrum since Q3 2021, and currently holding #2 position as the largest DEX by TVL on the chain.
Team Members and Qualifications:
Mike B, Tritium, Shakotan, Burns, Danko
The application comes from the community & ecosystem driving arm of Balancer, the Maxis. The Balancer Maxis, alongside community contributors (aka Ballers), handle most things operationally for the Balancer Protocol including but not limited to, governance management, reviews, business development, partnership management, automation of tasks to further decentralize and community support and other work within the ecosystem.
Project Links:
Balancer
- Website - https://app.balancer.fi/
- Twitter - https://twitter.com/Balancer
- Discord - https://discord.balancer.fi/
- Github - Balancer · GitHub
- Documentation - https://docs.balancer.fi/
Contact Information:
TG:
@danko8383, @mikeisballin, @tritium_vlk
Twitter:
Email: arbitrum@balancer.finance
Do You Acknowledge That Your Team WIll Be Subject to a KYC Requirement?: Yes
SECTION 2: GRANT INFORMATION
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size:
1.2M ARB = 150,000 ARB per 2 week tranche for 16 weeks.
It seems that far more than the 50M $ARB has been requested by various grants. Upon analysis of the asks and programs presented, we feel our current ask is reasonable.
The program/automation specified here can function with any amount of $ARB really, and we are happy to take part in a process of normalizing the ask between grants. We would ask potential grantees and delegates to try to keep it focused on the good of the Arbitrum Ecosystem and avoid being overly competitive through any such process
Grant Breakdown:
The purpose of this grant is to augment economic activity on Arbitrum by building an autonomous mechanism for distributing incentives in the form of ARB to boost all Balancer liquidity across the Arbitrum network. There are certain criteria that boosts certain asset classes and pool types depending on the composition and surrounding integrations of particular pools.
Balancer has already initiated this incentive program using the ARB allocated during the original DAO airdrop. The nature of the automated incentives program proposed for this initiative is as follows
There is a pool of 40,000 ARB weekly to augment incentives on Balancer Arbitrum pools.
Each pool is given a weighting that is determined by the following metrics:
- Each pool gets a base value depending on how much veBAL vote weight the pool has
- An additional dynamic multiplier is applied based on the revenue generated from said pool
- An additional static multiplier is applied based on the category of the pool, with the categories defined below
Balancer Pool with veBAL Voting Weight: 1x
This is the base number dependent on the total vote weight for a particular pools gauge and will serve as the base for the below multipliers
Pool Efficiency: 1-3x
This multiplier is dependent on the amount of revenue a pool has earned relative to the BAL emitted to it. This makes sure that pools that perform well relative to the incentives it has will be rewarded with extra incentives.
This is calculated as feesEarned/(value of bal emitted + 1)
—
Ecosystem Integrations: 1.5x
Pools with >500k of TVL deposited through external protocols such as Pendle style yield splitting, money markets using pool tokens as collateral, and other partner integrations.
Core Infra: 1.75x
Pools that serve as a core piece of infrastructure, such as stablecoin pairs, LST pairs, and 8020 governance systems.
New and Novel AMM types: 2x
For non-Balancer created custom pool types built upon Balancer that demonstrate an innovative approach to AMM design. This includes Gyro E-CLP pools and Xave FX pools. New AMMs may be moved from New and Novel to one of the other 2 categories after an initial period of extra boost to help highlight new tech.
—
Note, a pool can only get one of the above 3 multipliers, whichever is highest, and is applied additively along with the pool efficiency multiplier. The max multiplier for a pool is 3x, and any multiplier above 3x will be rounded down to 3. Individual pools are capped at 10% of weekly ARB distributions, with the exception of LST pools which are capped at 20%.
Each pool then gets its share of the 63,750 weekly ARB directly added as secondary incentives on the gauge according to their relative total weighting determined by the above factors.
Additionally, 11,250 ARB will be used to incentivize Core liquidity, specifically the USD 4pool and wstETH/4pool each week. This, along with our deep wstETH/weth liquidity, will allow us to route between all major stables, weth, and wstETH. The list of pools is subject to change.
Finally, note that the reasons for boost and multipliers as well as fixed allocations may be changed by Balancer governance. We welcome members of the Arbitrum Community to come talk to us about ideas/suggestions they have on how to adopt the program and/or to bring governance around these changes.
Funding Address:
1.2M ARB to Balancer LM Multisig: 0xaF23DC5983230E9eEAf93280e312e57539 (in biweekly tranches)
Funding Address Characteristics:
Arbitrum LM Multisig - controlled by 3/6 Balancer Maxis.
Contract Addresses:
$ARB ChildChainGaugeInjector: 0xf23d8342881edecced51ea694ac21c2b68440929. Controlled by the LM Multi-sig.
Arbitrum veBAL voting: Balancer
$ARB will be sent by the LM Multisig into the $ARB Injector contract on a biweekly basis as funds become available. The payload to send these funds will include a payload that configures the injector to distribute funds to various Balacer Pools through our gauge system and based on veBAL voting. The injector will then maintain a steady stream of these funds for a 2 week period.
Funding from the injector will flow to a dynamic set of veBAL gauges based on veBAL voting so a specific list of addresses can not be provided. The table below includes links to all of the current gauge addresses that would receive funds should they be paid out based on voting over the last 2 weeks.
Gauges accept Balancer Liquidty Pool tokens (BPTs) as deposits, and emit rewards based on deposits. Gauges can be added to the BAL emissions system following a governance process.
ARB emissions for this program are directed based on signal voting by veBAL holders, which take effect weekly at 00:00 GMT on Thursday. Once the program begins, new CSV files that describe the exact amounts payed in a human readable fashion will be created by each bi-weekly automation run in this GitHub Repo or one similar to it. The Dune Dashboard will also provide detailed information on where $ARB as well as other reward tokens are flowing and how it changes over time.
This program provides a way for DAOs who were not able to directly participants in this program to benefit from additional ARB incentives, as well as Balancers native emissions and $AURA emissions provided when using Aura Finance. We warmly invite DAOs looking for liquidity to touch base via our Discord for help configuring optimal liquidty, working through the governance process and understand the economics of it all.
SECTION 3: GRANT OBJECTIVES AND EXECUTION
Clearly outline the primary objectives of the project and the Key Performance Indicators (KPIs) used to measure success. This helps reviewers understand what the project aims to achieve and how progress will be assessed.
Objectives:
Ease the Cost of Liquidity to Ecosystem Projects
Liquidity is an extremely important aspect for projects to thrive. We hope by augmenting Balancer pools on Arbitrum, we can cheapen the cost of liquidity to all projects on Arbitrum looking for a home for liquidity.
Deepen Core Liquidity on Arbitrum
It is essential for many DeFi applications, primarily money markets, to have deep liquidity for protocol liquidations. We hope that this grant will result in this liquidity to be usable across the thriving Arbitrum Defi ecosystem for major assets and LST’s.
Foster Innovation in the AMM Space
We have observed projects have great success by building their custom AMM’s on top of Balancer flexible architecture and we hope to encourage more projects to build out AMM’s to suit their needs.
Increased Adoption
We are determined to further drive the adoption of Arbitrum on Balancer as a major part of the ecosystem.
Our primary objectives for this grant are therefore:
- Extend the length and size of the currently running program
- Demonstrate to the Arbitrum DAO, Foundation and Ecosystem that Balancer is a measured and responsible DAO with deep experience in incentive management.
- Increase the number of pools and projects using Balancer and veBAL to host liquidity.
- Ensure that we’re not left behind as other DEXs receive large grants that give them an outsized advantage.
- Increase LSD liquidity on Arbitrum and introduce wstETH as a viable pairing token for better returns for LPs.
Key Performance Indicators (KPIs):
- Number of projects participating in the program
- BAL emissions flowing towards pools on Arbitrum (absolute / %)
- Number of pools participating in the program (receiving votes from veBAL)
What Balancer has done with the Arbitrum DAO Airdrop:
Of the circa 3 million ARB awarded to Balancer in the initial airdrop, 2 million was deposited into a liquidity pool with equal parts AURA and BAL. The remaining 1 million was allocated towards matching bribes placed by DAOs to support Arbitrum liquidity. You can see the previous distributions per pool here.
Since then, we have spent more time thinking about this system, and created an automated system to allocate a fixed amount of ARB per week to pools there based on veBAL voting. BIP-429 describes how this program will function with funding of 40,000 ARB per week and provides some example data for the last voting round given these parameters. The automated vote-based nature of the system ensures alignment between the protocol and LPs, as pool incentives flow to their respective pools based on transparent on-chain votes.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:
New Arbitrum protocols need liquidity to launch and succeed. This grant/program will allow economically intelligent builders to build very cost effective liquidity natively on the Arbitrum network.
Justification for the size of the grant:
As this grant comes to fruition, many DEXes will be able to offer higher yields. It is important that Balancer can remain competitive as the second largest DEX for Arbitrum TVL. For this reason, we invite the size of our grant to be adjusted to be in line with other grants offered to DEXes in order to create a fair playing field.
The current program running on our airdrop with 40k ARB per week is starting to gain traction, but is planned to end around November 3rd.
Balancer currently emits a total of 121,929 BAL (about 400k USD) per week. We believe this program will help direct more emissions into the Arbitrum ecosystem. We believe the described mechanism to be great for aligning Arbitrum ecosystem projects with Balancer and the greater community which benefits from deep on-chain liquidity native to the Arbitrum network.
Example numbers based on the current situation:
Here is an example of how 200000 ARB (based on our original ask) would be distributed had it been distributed between 07 September - 21 September, 2023. A new table for the most recent 2 week epoch, distributing 150,000 $ARB over 2 weeks will be provided in the comments of the Forum before the end of Friday October 6th.
Note: We expect this pool list to increase over time and is reflective of the pool list from the last 2 epochs
Requested Grant Size
ARB Per Week: 75,000 for 16 weeks (1.2 million ARB)
Total ARB Requested:
1.2M
BAL per week required at current pricing for 1/1 matching:
If the program started today 7582($24,800) BAL would be flowing to match 75,000 ARB($66,000).
In program incentives follow voting which produces BAL emissions. The idea is that this will create competition for rewards increasing the amount of BAL emitted while the ARB remains fixed.
We expect the boost in ROI provided by the $ARB rewards to encourage more fee recycling and external voting and thereby increase BAL and AURA. It will likely take a number of 2 week epochs before the results can be fully understood.
Execution Strategy:
See github for more details, code, and results: https://github.com/BalancerMaxis/data_automation/blob/main/notebooks/arb_dao_grant_distribution/dao_grant.ipynb
In summary, here is how it works.
- Every 2 weeks the script is run to ARB distribution based on current veBAL voting.
- A json payload files for the Balancer LM Multisig on ARB to configure the rewards injector with these values.
- The ARB Rewards Injector pays the amounts configured out such that it creates a consistent stream of rewards on the gauge.
- The 2 week amount is split into 2 weekly injections which stream alongside AURA and BAL to depositors in the gauge.
- Each new week of ARB injections when the last one finished and there is sufficient funding for the currently configured program.
- The Rewards injector must always have sufficient funding for the next week to operate.
- The Tokens in the rewards injector can be swept by LM Multisig.
- Fund tranches will be claimed biweekly by Hedgey and sent to the injector along with a distribution schedule output by the automation described above.
- The 2 week amount is split into 2 weekly injections which stream alongside AURA and BAL to depositors in the gauge.
Grant Timeline:
The funds will start being distributed within 15 days of the receipt of the first payment. The program will continue until all ARB is spent 16 weeks later. The LM Multisig is an operational multisig that can act reasonably quickly. It will work to try to ensure that rewards are claimed and schedules are loaded in sufficient time to prevent any gaps in emissions.
Funding Tranches:
Funding will be delivered in biweekly Tranches via Hedgey. The LM Multisig will handle claiming these tranches and funding/configuring the injector, which will facilitate a 2 week steady flow of funds.
The LM Multisig will execute the first time between 8 and 13 days after the first Tranche become available. This will allow a solid buffer to prevent tight time windows between 2 biweekly schedules.
Milestone Descriptions:
| Milestone Goal | Success Metric | Source of Truth |
|---|---|---|
| % veBAL to Arbitrum | Current: 6.19%, Failure: <9%, OK: 12%, Good: 15% | veBAL voting or weekly reports from the distribution as shown above. |
| Increase number of projects with pools on Balancer | 4 new projects bringing liquidity to Balancer on Arbitrum | List of pools with gauges over >100k TVL (will add to dune dash) |
| Increase Arbitrum TVL ( % of Balancer TVL) | Failure: <10%, OK: 10-30%, Good: 50%+ | TVL of Arbitrum relative to the price of eth (to account for market swings) |
| Increase Volume on Arbitrum for Balancer | Failure: <10%, OK: 20-40%, Good: 100%+ | Cumulative 30d volume of Balancer on Arbitrum relative to the price of eth (to account for market swings) |
Four monthly incentive distributions allocated through the injector. Continuous and uninterrupted distribution would serve as a testament to the program’s efficiency.
Balancer has a clear track record of distributing working incentives efficiently and on time, this can be verified on-chain.
SECTION 5: PROTOCOL DETAILS
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the Protocol Native to Arbitrum?:
Although Balancer was first launched on Ethereum, it was one of the first DeFi protocols to deploy on Arbitrum. Arbitrum is Balancer’s second largest network in terms of TVL and as one of the first movers to deploy on Arbitrum, it is now sitting at 2nd largest DEX by TVL behind Uniswap. With the investment of being a first mover to the ecosystem, and long time focus for the protocols business development strategies, Arbitrum is a key pillar in Balancer’s success now and in the future.
The Dune Plot below shows Emissions flows and Volume to Arbitrum. Clear growth can be shown in 2023. Notable events were the launch Radiant’s ve80/20 program on March 19th, and the start of the Airdrop Incentives Program on June 26th:
Balancer has been working with partners like Chainlink, 1inch, Lido, Rocketpool, Coinbase, Swell and others to create a robust LST ecosystem on Arbitrum with the goal of starting a movement focused on LST eth pairings for governance tokens and other uncorrelated token liquidity. To emphasize this point, the near term future will include utilizing Gyro-ECLPS to further increase the efficiency of LST liquidity. This is a dominant concentrated liquidity model, only offered via Balancer.
Balancers main pillar for growth on Arbitrum so far has been our unique offerings surrounding LST stableswaps. Further real growth for Balancer come from projects succeeding using Balancers tech, such as the Radiant launch on Arbitrum. These success are catalysts that spin up all our various flywheels and create excitement and engagement in the greater ecosystem.
BAL emissions are distributed in a decentralized way, and Balancer contributors have limited means to affect voting. Unlike many other DEXes applying here, we have chosen not to have direct control over emissions flows.
This program, combined with some engagement efforts should give us the ability to create more catalysts without offering special BD incentive deals to specific DAOs, which we generally try to avoid.
On what other networks is the protocol deployed?:
Balancer is currently deployed on Ethereum, Arbitrum, Polygon, Polygon zkEVM, Gnosis Chain, Base, Avalanche, and Optimism in a shared deployment with BeethovenX.
What date did you deploy on Arbitrum?:
The Balancer Vault was first deployed on Arbitrum on August 24th, 2021. See the transaction here.
Protocol Performance:
| Arbitrum TVL | $80m (2nd biggest chain on Balancer after Mainnet, 2nd largest DEX on Arbitrum) |
|---|---|
| 30-Day trading Volume | $90.2m |
| Analytics | Balancer Analytics |
| Dune Dashboards | https://dune.com/balancer |
Protocol Roadmap:
Balancer’s protocol development is informed and led by Balancer DAO voters. You could track and consult votes using the Snapshot page here.
Audit History:
Security is the most important value for Balancer. Balancer is one of the safest Defi protocols for this very reason. The protocol has been extensively audited, you can find the audits linked below:
SECTION 6: Data and Reporting
Provide details on how your team is equipped to provide data and reporting on grant distribution.
Is your team prepared to create Dune Spells and/or Dashboards for your incentive program?:
Yes. The DAO is working on creating a Dune dashboard by the specified deadline or earlier. We have created similar dashboards in the past. Here is an example that tracks our Gas Spend. Balancer Lab also maintains a robust Dune presence which can be found HERE.
