Authors: @danielmk, @0xDanko, @Xeonus, @mendesfabio, @Marcus

PR with Payloads

https://github.com/balancer/multisig-ops/pull/2744

Summary

This proposal aims to transition Balancer protocol from emission-subsidized growth to revenue-driven sustainability. It is designed to be voted alongside the companion [BIP-XXX] Operational Restructuring for Balancer.

The TL;DR of core changes introduced are:

• Reduce the V3 swap fee protocol share from 50% to 25%, so liquidity providers keep a larger share of the fees they generate.
• Halt all BAL token emissions immediately.
• Discontinue veBAL. No more (re)locks will be encouraged as all benefits to veBAL holders are halted. A compensation for the immediate discontinuation of veBAL is proposed below. .
• Route 100% of all protocol fees to the DAO Treasury, replacing the current fragmented split between veBAL holders, core pool incentives, partners, and the DAO.
• Delegate day-to-day governance decisions to a Core team mandate, while veBAL (during the one year phase out) and BAL holders retain voting power on major protocol decisions.
• Discontinue the Balancer Alliance program.
• Create a campaign to distribute $500K to veBAL holders as compensation for the abrupt end of economic benefits.
• Offer a BAL buyback and burn program capped at 35% of Treasury value at Snapshot (~$3.6M), providing exit liquidity for holders who want out. At current prices, this would retire roughly 35% of circulating supply.

Motivation & Context

Balancer’s tokenomics was designed for a growth phase, incentivizing liquidity through BAL emissions and distributing fees to veBAL holders and a small portion to the Treasury. That model achieved its original purpose, but has run its course. The economics are now working against the protocol.

• Emissions dilute every holder. Approximately 3.78M BAL will be emitted annually, creating persistent sell pressure and devaluing existing positions.
• The incentives market creates circular economics. The protocol pays intermediaries through incentives to attract liquidity that generates less fee revenue than the emissions cost.
• The Treasury captures a small fraction of revenue. Of (current) ~$1.65M in annualized protocol fees, the DAO currently receives only ~$290K/year (~17.5%). The remainder flows to veBAL holders and core pool incentives through legacy splits that no longer serve the protocol's interests.
• veBAL governance has been captured. Meta-governance protocols (Aura) and large holders (Humpy) have concentrated voting power, making veBAL governance increasingly unrepresentative of the broader Balancer community.

Metric	Current Value	Source
Protocol fees (annualized)	$1.65M	On-chain data, Dec/Jan/Feb/26
Protocol fees (3 months)	$413K	On-chain data
DAO fees (3 months)	$72K	On-chain data
Annualized DAO revenue	~$290K/year	Extrapolated from 3-month data
BAL price	~$0.154	Market data
BAL net asset value per token	~$0.160	Treasury / circulating supply
Treasury (excluding BAL)	~$10.3M	On-chain treasury records
Annual BAL emissions	~3.78M BAL	BAL emission schedule
Annual operating budget	$2.87M(1)	BIP-873 roadmap

(1) Does not take into account BLabs expenses

BAL is trading below its net asset value (NAV), meaning holders are implicitly subsidizing the Treasury. This proposal corrects that by offering exit liquidity at a fair price and building a model where the remaining Treasury sustains the protocol long-term.

Why act now: status quo vs. this proposal

	Status Quo (no change)	Proposed
Annual BAL dilution	~3.78M BAL/year	Zero
DAO revenue capture	~$290K/year (17.5% of fees)	~$1.22M/year (100% of fees)
Annual operating deficit	~$2.6M	~$700K
Treasury runway	<4 years	~9 years (neutral scenario)
veBAL economic value	Declining yield, market below NAV	Buyback at NAV (~$0.16)
Governance capture	Aura/meta-governance concentrated	Core team mandate + BAL/veBAL on major decisions
Incentives market	Circular economics, net-negative ROI	Eliminated

Continuing the current model for another year costs the protocol ~$580K in BAL sell pressure, ~$2.6M in operating deficit, and delivers diminishing returns to veBAL holders. This proposal offers a concrete alternative: route 100% of fees to the Treasury, reduce V3 protocol fees to attract more TVL, and move to an estimated ~$1.22M/year in DAO revenue against a lean operating budget (detailed in the companion Operations BIP, premises and assumptions to different scenarios can be found here: source).

Specification

BAL Emissions and Gauges

BAL token emissions are halted upon vote passage. A phased reduction, gradually winding down, would add complexity without objectively measurable benefits, including prolonging uncertainty. The vote and implementation timeline itself provides the market with advance notice.

The gauge infrastructure for third-party incentive routing (projects directing their own non-BAL rewards through the existing system) is maintained on a best-effort basis. The core team may address the long-term future of gauge infrastructure, including potential migration to MERKL. The intent is to preserve the ability for protocols like Aave, Lido, and RocketPool to incentivize their own liquidity on Balancer.

Protocol Fee Structure

At 50% swap fee, Balancer’s take is among the highest in DeFi. The reduction means LPs keep a larger share of the fees they generate, making Balancer pools more attractive for organic liquidity. The trade-off is lower per-swap revenue, but a more competitive fee structure should attract incremental TVL. Individual pool rates may be adjusted by the core team if the data supports differentiation.

Fee Type	Current Rate	Proposed Rate	Rationale
V3 swap fees	50%	25%	Reduces Balancer’s protocol fee. LPs keep 75% of swap fees, making pools more competitive.
V2 swap fees	50%	50% (unchanged)	V2 is being sunset [BIP-887]. No incentive to reduce fees on a deprecated version.
Yield fees (incl. boosted pools)	10%	10% (unchanged)	Already competitive. No change needed.
reCLAMM protocol fee	25%	25% (unchanged)	Already set at the proposed V3 standard in [BIP-893].
Protocol fee distribution	Split: veBAL / incentives / DAO	100% to DAO Treasury	Eliminates circular economics. All revenue builds the operating reserve.

Fee Routing

100% of all protocol fees route to the Treasury. This replaces the current split where revenue was distributed to veBAL holders (fee share), core pool incentives, the Balancer Alliance program, partners and the DAO. Under the new model, all protocol revenue (V2 swap and yield fees, V3 swap fees, V3 yield fees, LBP fees, and any future fees) flows to a single destination. This simplifies accounting, minimizes the need for onchain operations, maximizes capital reserves for runway, and eliminates the circular economics of using protocol revenue to subsidize liquidity incentives.The objective of the protocol going forward is to run as profitably as possible, accumulating a treasury that can be eventually used for more buy backs in the future.

Vote Markets

All voting-incentive-based programs are terminated. The protocol will no longer allocate budget to StakeDAO's Votemarket, Paladin, or any other vote marketplace to attract liquidity through incentive-driven gauge voting. With no BAL emissions or gauge voting, these programs serve no economic purpose.

veBAL and Governance

Upon passing of the vote, the last bi-weekly fee run will be executed as normal. Thereafter, fee distributions to veBAL holders will cease. They will no longer receive protocol fee share or any direct economic benefit from holding veBAL. With BAL token emissions eliminated and fees routed entirely to the Treasury, there is no economic function for veBAL to serve.

Governance transitions to a dual voting system where both veBAL and unlocked BAL tokens carry voting rights. This means any BAL holder can participate in protocol governance without needing to lock tokens, while existing veBAL holders retain their voting power for the duration of their lock. The specific mechanics of this dual system (vote weighting, quorum thresholds, and implementation details) will be defined in a dedicated governance proposal.

veBAL Economics Cutoff Compensation Campaign

To compensate veBAL holders that have locked positions and will experience an abrupt cutoff on economic incentives, a $500K compensation campaign will be distributed over a 6-month period. Distributions will be proportional to each holder’s veBAL balance, retroactively snapshot to the moment of this proposal, paid in stablecoins from the DAO Treasury.

Balancer Alliance

The Balancer Alliance Program (BIP-812) is discontinued. The program shared protocol fees with partners in exchange for veBAL accumulation and permanent relocking. Adoption fell short (Dune), and the program's architecture is incompatible with the restructured tokenomics. It was built entirely around the veBAL system that this proposal fundamentally changes.

Going forward, partner alignment is achieved through competitive LP fee economics, with the core team having leeway to negotiate specific fee structures where warranted. Existing Alliance commitments will be honored through the current processing cycle and then terminated.

Partner Fee Split Agreements

Given 100% of protocol fee revenue will be redirected to the DAO Treasury, any partner fee share agreement will be terminated. This includes the fee share with Beets for managing the OP deployment [BIP-800] as well as QuantAMMs Protocol fee framework [BIP-871]. EZKL [BIP-875] is sunsetted. Any future partner fee share agreement needs to be evaluated on a case-by-case basis and decided by the Core team.

BAL Buyback and Burn Offer

The proposal offers to buy back BAL at Treasury's net asset value (NAV) excluding BAL, providing voluntary exit liquidity for holders at a price that remains a meaningful option over the current market.

Parameter	Value
Total cap	35% of Treasury holdings at Snapshot, earmarked for buybacks
Buyback price	NAV price (Treasury $ excluding BAL / BAL circulating supply)
All purchased BAL	Burned
Exercise	12 months post Snapshot; 12 week window

Why NAV?: BAL's market price as of writing ($0.154) sits below the protocol's net asset value per token ($0.16). Buying at NAV means the DAO pays a slight premium over market, but the positive impact is significant: holders who want out get a fair price without slippage or market impact, and every BAL purchased is permanently removed from circulating supply.

Why 35%?: At current Treasury levels ($10.3M), the 35% cap allocates approximately $3.6M for buybacks. Earmarking this amount at Snapshot effectively creates a price-floor for token holders and secures a healthy operational runway in the Treasury.

Scale of impact: At ~$3.6M and a NAV of ~$0.16, the buyback would retire approximately 22.7M BAL if fully exercised. Roughly 35% of circulating supply and 6x the annual emission rate. This substantially addresses the overhang from years of emission-driven dilution in a single program.

Execution: The Treasury Council will earmark and set aside the buyback allocation in stablecoins. After 12 months (once veBAL locks begin expiring), a 12-week claim window opens for holders to burn their BAL against that allocation. The specific claim mechanism (smart contract design, eligibility verification) is TBD and will be implemented by the core team prior to the window opening. If the buyback is not fully exercised, remaining stablecoins reintegrate into the Treasury when the window closes.

Parameter	Value
Buyback price	~$0.16/BAL (NAV)
Total cap (35%)	~$3.6M (at $10.3M treasury)
BAL acquired (full redemption)	~22.7M BAL (~35% of the circulating supply)
Post-buyback treasury	~$6.2M remaining

At the post-buyback Treasury level (~$6.2M), with estimated DAO revenue of ~$1.22M/year and the $1.9M/year operating budget outlined in the companion Operations BIP, the annual deficit narrows to ~$700K, giving Balancer development ~9 years of runway in the neutral scenario.

Expected Impact

BAL Holders

• Positive: Halting emissions and offering buyback options provides a voluntary exit at NAV value, favoring exiting investors. Reduced supply and real revenue model support long-term value for holders who stay as governance stakeholders. BAL tokens will gain voting power through the new dual voting system alongside veBAL.
• Negative: No more fee distributions via veBAL. Economic rights are sunset. Holders who locked for yield lose their expected return.
• Net: Holders who believe in Balancer's future benefit from zero dilution and a leaner protocol focusing on PMF as opposed to incentives. Holders who want to exit get a fair deal and liquidity depth that is non-existent today. The current veBAL model was already delivering diminishing returns and the buyback offer provides more value than riding out the decline.

Liquidity Providers

• Positive: V3 protocol fee drops from 50% to 25%, meaning LPs keep a larger share of swap fees. Simplified fee structure is easier to manage.
• Negative: BAL emission rewards disappear entirely. For LPs who were net-positive only because of BAL rewards, this makes those positions unprofitable. Projects that relied on gauge voting (and vlAURA) to attract liquidity to their Balancer pools lose that mechanism.
• Net: LPs increase earnings from organic swap fees. For those who depended on BAL incentives, the fee reduction partially offsets the losses. For pools that were not incentive-dependent, results only improve. Partners building on Balancer's core infrastructure (aggregators, chain deployments) are unaffected or benefit.

DAO Treasury

• Positive: 100% fee capture. Using fee statistics for the months after the November exploit: Estimated ~$1.22M/year revenue vs. current ~$290K/year. ~$6.2M post-buyback reserve.
• Negative: ~$3.6M one-time cost for buyback and $500K for veBAL holder compensation impact future runway.
• Net: The Treasury is well positioned long-term. The buyback offer and the veBAL compensation campaign are one-time expenses that provide holder alignment and remove an overhang.

Conclusion

Stopping emissions entirely could trigger meaningful TVL decline as incentive-dependent liquidity exits. The V3 swap fee reduction from 50% to 25% partially compensates LPs, and core pools already generate organic volume regardless of incentives since the protocol was accelerating this transition. Moving forward, BD will focus on key partnerships to retain business.

veBAL holders lose economic rights. They may vote against both BIPs to preserve the status quo. The buyback offer at NAV and the compensation campaign provide a fair exit, more valuable than the diminishing returns of the current model, while maintaining a healthy runway for the Balancer protocol to keep operating with a lean structure that is still able to deliver positive results and innovations.

This vote gives BAL holders a choice: take a fair exit or stay for a leaner, more sustainable protocol.