balFactor: incentivizing BAL liquidity on Balancer

Read the formatted version of this proposal at: https://forum.balancer.finance/t/balfactor-incentivizing-bal-liquidity-on-balancer/102 The content below has been slightly edited for clarity on a text-only format (e.g. links manually included). __

TL,DR

Proposal to apply a balFactor = 1.5 to the liquidity of every “useful BAL pair”, i.e. { BAL & one of the uncapped tokens (currently WETH, DAI, USDC, WBTC) }, along with a capFactor to BAL adjusted liquidity (i.e. after applying the other factors: ratio, wrap, fee) in case it exceeds $50M. The goal is to increase the incentive for liquidity provisioning with BAL, which should increase BAL liquidity therefore providing better conditions for a wider distribution of BAL ownership.

Context

Users @jammy, @Lex Moskovski and others at the #liquidity-providers channel on Balancer’s Discord came up with the idea of increasing incentives for BAL pools. After a lot of considerations from multiple people and refining on that initial idea, the community ended up voting (on 2020-07-10) on the creation of a balFactor:

<image with Discord voting results: balFactors of 1 and 1.5 were the vast majority of votes>

As it was bound to happen at some point, Discord voting was not enough to reach consensus, and a final decision on the matter was postponed until a voting tool could be implemented taking into account the BAL (governance tokens!) balance of each community member.

The Proposal

Application of a capFactor in similar terms as described in the original capFactor proposal (https://forum.balancer.finance/t/capfactor-capping-eligible-liquidity-to-10m-per-token/56), limiting the BAL adjusted liquidity to $50M.

After the capFactor for all capped tokens has been calculated (to correct down an eventually excessive adjusted liquidity for each capped token), a balFactor of 1.5 is applied to every pair of type {BAL & uncapped_token}.

Further Considerations

Pairs with capped tokens do not qualify for the balFactor, so that pairs of questionable trading demand/utility (e.g. {BAL & cBAT}) are not incentivized.

The $50M cap is more of a safety measure, in place just for the unlikely scenario where the balFactor results in huge and unnecessary BAL liquidity coupled with an unreasonable BAL price spike. Such a scenario is automatically neutered by the cap. For instance, with $100M of BAL adjusted liquidity, the liquidity in all BAL pairs is cut in half for the purposes of liquidity mining distribution (i.e. capFactor_BAL = min(100M, 50M)/100M = 0.5, as explained in the capFactor proposal).Read the formatted version of this proposal at: https://forum.balancer.finance/t/balfactor-incentivizing-bal-liquidity-on-balancer/102 The content below has been slightly edited for clarity on a text-only format (e.g. links manually included).

_

TL,DR

Proposal to apply a balFactor = 1.5 to the liquidity of every “useful BAL pair”, i.e. { BAL & one of the uncapped tokens (currently WETH, DAI, USDC, WBTC) }, along with a capFactor to BAL adjusted liquidity (i.e. after applying the other factors: ratio, wrap, fee) in case it exceeds $50M. The goal is to increase the incentive for liquidity provisioning with BAL, which should increase BAL liquidity therefore providing better conditions for a wider distribution of BAL ownership.

Context

Users @jammy, @Lex Moskovski and others at the #liquidity-providers channel on Balancer’s Discord came up with the idea of increasing incentives for BAL pools. After a lot of considerations from multiple people and refining on that initial idea, the community ended up voting (on 2020-07-10) on the creation of a balFactor:

<image with Discord voting results: balFactors of 1 and 1.5 were the vast majority of votes>

As it was bound to happen at some point, Discord voting was not enough to reach consensus, and a final decision on the matter was postponed until a voting tool could be implemented taking into account the BAL (governance tokens!) balance of each community member.

The Proposal

Application of a capFactor in similar terms as described in the original capFactor proposal (https://forum.balancer.finance/t/capfactor-capping-eligible-liquidity-to-10m-per-token/56), limiting the BAL adjusted liquidity to $50M.

After the capFactor for all capped tokens has been calculated (to correct down an eventually excessive adjusted liquidity for each capped token), a balFactor of 1.5 is applied to every pair of type {BAL & uncapped_token}.

Further Considerations

Pairs with capped tokens do not qualify for the balFactor, so that pairs of questionable trading demand/utility (e.g. {BAL & cBAT}) are not incentivized.

The $50M cap is more of a safety measure, in place just for the unlikely scenario where the balFactor results in huge and unnecessary BAL liquidity coupled with an unreasonable BAL price spike. Such a scenario is automatically neutered by the cap. For instance, with $100M of BAL adjusted liquidity, the liquidity in all BAL pairs is cut in half for the purposes of liquidity mining distribution (i.e. capFactor_BAL = min(100M, 50M)/100M = 0.5, as explained in the capFactor proposal).Read the formatted version of this proposal at: https://forum.balancer.finance/t/balfactor-incentivizing-bal-liquidity-on-balancer/102 The content below has been slightly edited for clarity on a text-only format (e.g. links manually included).

_

TL,DR

Proposal to apply a balFactor = 1.5 to the liquidity of every “useful BAL pair”, i.e. { BAL & one of the uncapped tokens (currently WETH, DAI, USDC, WBTC) }, along with a capFactor to BAL adjusted liquidity (i.e. after applying the other factors: ratio, wrap, fee) in case it exceeds $50M. The goal is to increase the incentive for liquidity provisioning with BAL, which should increase BAL liquidity therefore providing better conditions for a wider distribution of BAL ownership.

Context

Users @jammy, @Lex Moskovski and others at the #liquidity-providers channel on Balancer’s Discord came up with the idea of increasing incentives for BAL pools. After a lot of considerations from multiple people and refining on that initial idea, the community ended up voting (on 2020-07-10) on the creation of a balFactor:

<image with Discord voting results: balFactors of 1 and 1.5 were the vast majority of votes>

As it was bound to happen at some point, Discord voting was not enough to reach consensus, and a final decision on the matter was postponed until a voting tool could be implemented taking into account the BAL (governance tokens!) balance of each community member.

The Proposal

Application of a capFactor in similar terms as described in the original capFactor proposal (https://forum.balancer.finance/t/capfactor-capping-eligible-liquidity-to-10m-per-token/56), limiting the BAL adjusted liquidity to $50M.

After the capFactor for all capped tokens has been calculated (to correct down an eventually excessive adjusted liquidity for each capped token), a balFactor of 1.5 is applied to every pair of type {BAL & uncapped_token}.

Further Considerations

Pairs with capped tokens do not qualify for the balFactor, so that pairs of questionable trading demand/utility (e.g. {BAL & cBAT}) are not incentivized.

The $50M cap is more of a safety measure, in place just for the unlikely scenario where the balFactor results in huge and unnecessary BAL liquidity coupled with an unreasonable BAL price spike. Such a scenario is automatically neutered by the cap. For instance, with $100M of BAL adjusted liquidity, the liquidity in all BAL pairs is cut in half for the purposes of liquidity mining distribution (i.e. capFactor_BAL = min(100M, 50M)/100M = 0.5, as explained in the capFactor proposal).Read the formatted version of this proposal at: https://forum.balancer.finance/t/balfactor-incentivizing-bal-liquidity-on-balancer/102 The content below has been slightly edited for clarity on a text-only format (e.g. links manually included).

_

TL,DR

Proposal to apply a balFactor = 1.5 to the liquidity of every “useful BAL pair”, i.e. { BAL & one of the uncapped tokens (currently WETH, DAI, USDC, WBTC) }, along with a capFactor to BAL adjusted liquidity (i.e. after applying the other factors: ratio, wrap, fee) in case it exceeds $50M. The goal is to increase the incentive for liquidity provisioning with BAL, which should increase BAL liquidity therefore providing better conditions for a wider distribution of BAL ownership.

Context

Users @jammy, @Lex Moskovski and others at the #liquidity-providers channel on Balancer’s Discord came up with the idea of increasing incentives for BAL pools. After a lot of considerations from multiple people and refining on that initial idea, the community ended up voting (on 2020-07-10) on the creation of a balFactor:

<image with Discord voting results: balFactors of 1 and 1.5 were the vast majority of votes>

As it was bound to happen at some point, Discord voting was not enough to reach consensus, and a final decision on the matter was postponed until a voting tool could be implemented taking into account the BAL (governance tokens!) balance of each community member.

The Proposal

Application of a capFactor in similar terms as described in the original capFactor proposal (https://forum.balancer.finance/t/capfactor-capping-eligible-liquidity-to-10m-per-token/56), limiting the BAL adjusted liquidity to $50M.

After the capFactor for all capped tokens has been calculated (to correct down an eventually excessive adjusted liquidity for each capped token), a balFactor of 1.5 is applied to every pair of type {BAL & uncapped_token}.

Further Considerations

Pairs with capped tokens do not qualify for the balFactor, so that pairs of questionable trading demand/utility (e.g. {BAL & cBAT}) are not incentivized.

The $50M cap is more of a safety measure, in place just for the unlikely scenario where the balFactor results in huge and unnecessary BAL liquidity coupled with an unreasonable BAL price spike. Such a scenario is automatically neutered by the cap. For instance, with $100M of BAL adjusted liquidity, the liquidity in all BAL pairs is cut in half for the purposes of liquidity mining distribution (i.e. capFactor_BAL = min(100M, 50M)/100M = 0.5, as explained in the capF