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 veBA...