The 8020 Initiative

https://medium.com/@MiND_/the-8020-initiative-fd3affbcde34

Noticing the shift in the governance tokenomic tides, we are witnessing a new governance paradigm rapidly evolving. With the adoption of multiple notable protocols such as Radiant, Aave, Alchemix, Paraswap, and Timeless Finance, it’s time we broke down the next stage in efficient and streamlined protocol governance technology: 8020.

The problem

The majority of DeFi protocols implement a native token single-sided staking mechanism, with governance tokens acquired and staked in return for governance voting power.

While incentivizing staking successfully increases governance participation, it also (un)effectively reduces the circulating supply available for swaps. As a result, a smaller portion of capital is supplied to liquidity pools, and this lack of liquidity leads to several issues:

  • Increased slippage
  • Inability to facilitate larger trades
  • Higher price volatility for the underlying tokens

To address these challenges, protocols must provide additional incentives for their token, not only to multiple liquidity pools but also across multiple decentralized exchanges. This fragmented system leads to protocols entangling themselves in an inefficient, expensive, and complicated incentive program.

To make matters worse, protocols often implement a vote escrowed position, rewarding users with increased voting power and liquidity mining boosts the longer they lock their position. The issue? A vast majority of the token supply is locked away from Liquidity Pools. As users lock their governance positions, that liquidity is made redundant for trading leading to fractionalized liquidity, inefficient swaps, and volatile tokenomics.

The Solution

By leveraging Balancer weighted math, liquidity pools can be configured with up to 8 tokens in any desired weighting. 8020 refers to a two-asset pool with 80% of one asset and 20% of another. The 8020 initiative proposes using an 8020 pool BPT token as the governance token instead of a single token, with a pool configuration of 80% of the protocol’s native token paired with their chain’s base token or a highly liquid stablecoin.

This model hosts a range of benefits including:

  • Deep Liquidity
  • Asymmetric upside and reduced impermanent loss (IL)
  • Efficient incentive programs
  • Hedging and price appreciation

What’s more, utilizing the BPT as the governance token unlocks a new realm of possibilities for additional mechanics.

Deep Liquidity

As mentioned before, single-sided staking leads to large quantities of token liquidity being removed from the circulating supply. When combined with a vote escrowed model, it results in a vast portion of liquidity being removed from circulation for extended periods, spanning multiple years!

Harnessing a liquidity pool BPT as the governance token, the 8020 model circumnavigates this issue. Instead of staking the token itself, users stake the pools BPT, allowing the underlying liquidity to actively participate in swaps.

For the first time in governance history, as the sum of staked tokens grows, the available trading liquidity increases rather than decreases.

And of course, deep liquidity means:

  • Reduced slippage
  • Ability to facilitate large trades
  • Lower price volatility

By addressing the limitations of traditional single-sided staking, the 8020 model fosters an ecosystem where liquidity thrives, enabling smoother and more efficient trading experiences for users.

For reference, at the time of writing, Balancer’s 8020 governance pool hosts a TVL of over $208M, leading to BAL being one of the most liquid tokens in DeFi. Check it out for yourself here.

Efficient Incentive Programs

With the need to facilitate swaps, the traditional single-sided model necessitates incentives for both the staking pool and other liquidity pools. If protocols integrate the governance token into an 80/20 liquidity pool, the need to split and direct incentives to other DEXs is eliminated.

In essence, the 8020 model consolidates these incentives, removing the need to fractionalize liquidity across multiple markets. As a result, the token supply is concentrated in one primary pool, vastly reducing slippage and offering a simpler, more cost-effective incentivization program.

But that’s not all; by utilizing a liquidity pool BPT for governance an additional stream of incentives automatically presents itself — Swap Fees.

Each pool has its swap fee uniquely set based on the underlying assets and AMM logic used. With Balancer technology, protocols can dynamically set their swap fee to their own unique position, with a portion of these fees flowing to liquidity providers as an incentive for providing liquidity.

The integration of swap fees as an inherent incentive mechanism within the 8020 model strengthens the overall ecosystem, promoting liquidity provision, and enabling users to reap rewards for their active engagement.

Take Radiant Capital as an example, after adopting the 8020 model and drawing in a TVL of almost $43M, the pool facilitated 44,046 swaps with a swap fee of 0.5% and generated $644,744 in swap fees in the first 28 days. To date, Liquidity Providers have earned an additional $751,529 that would never have been possible with a single-staked model. Check out the full case study below.

Balancer on Twitter: “In less than 1 month,@RDNTCapital unlocked a governance position with over $40 million in liquidity generating $644,744 in swap fees for LPs, with $327,771 in protocol fees recycled back into the pool as incentives.This is the power of #ve8020.A 🧵 pic.twitter.com/tIjl9QlxWR / Twitter”

In less than 1 month,@RDNTCapital unlocked a governance position with over $40 million in liquidity generating $644,744 in swap fees for LPs, with $327,771 in protocol fees recycled back into the pool as incentives.This is the power of #ve8020.A 🧵 pic.twitter.com/tIjl9QlxWR

Asymmetric Upside and Reduced IL

Why 8020? Balancer’s weighted technology offers unbound flexibility in pools, and an 80/20 split represents the perfect middle ground for native staked tokens.

With 80% of supplied tokens being the protocol token, this model offers asymmetric upside, meaning the upside potential is far greater for the native token as opposed to the base token. A 50/50 pool is generally avoided for this purpose as it offers limited exposure to the native token while posing increased IL potential should the native token appreciate substantially.

While there is still some inherent risk of impermanent loss, as illustrated in the figure below, the 80/20 split offers substantially reduced exposure to IL, while retaining the benefits of deep liquidity and exposure to the base token.

By striking the right balance between token composition, the 8020 model maximizes exposure to the underlying native token, with liquidity providers enjoying the advantages of deep liquidity, asymmetric exposure to the base token, and minimized impermanent loss.

Hedging and Price Appreciation

While asymmetrically skewed to the protocol’s native token, 8020 also provides exposure to a base asset that can act as a hedge for the position. This exposure becomes significant in situations where the price of the base asset experiences a rapid increase or if the price of the native asset declines. In such scenarios, arbitrageurs are incentivized to rebalance the pool.

In layman’s terms, this means that if the base token significantly increases, the native token will appreciate alongside it due to the correlation of the tokens. This correlation allows users to benefit from the potential upside of both tokens.

In 2021, Aave opted to implement a Balancer 8020 pool BPT into its safety module. Increasing exposure to ETH, whilst also acting as a safety backstop for Aave liquidity pools should they face cascading liquidations. An exemplary display of the 8020 model, be sure to check out the full story.

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8020 Evolution

The realm of innovation within the 8020 governance model extends far beyond its initial implementation. By employing a pool BPT as the governance token, a multitude of possibilities opens up, paving the way for additional mechanics.

ve8020

ve8020 is a vote-escrow system created and implemented by Balancer which draws from Curve’s veCRV mechanism. Users lock their 80/20 BAL/WETH BPT in exchange for the governance token, veBAL. The duration of locking can range from one week to one year, with the amount of veBAL received directly proportional to the number of locked BPT tokens and the locking period duration.

Why innovate? Curve’s ve model has seen widespread adoption across the industry but is it the most effective way to facilitate governance participation?

As stated, one of the major drawbacks to single-sided governance staking is the reduction in token liquidity across the market. As users lock their governance positions that liquidity is effectively made redundant for trading. ve8020 has the opposite effect; every time users lock into governance positions trade liquidity increases! Through the innovation of Balancer’s weighted pools, the more liquidity that flows into an 8020 governance position, the deeper the liquidity becomes for the underlying tokens.

Additionally, a ve8020 position provides protocols with an ever more focalized point of incentives — Lockers. Via incentivizing lockers, protocols increase the liquidity of their token without having to directly incentivize the DEX, harnessing a means to reduce the dilution of incentives flowing to mercenary farmers. Liquidity Providers who do not wish to lock will automatically earn swap fees alongside some additional opportunities made possible by the 8020 Initiative.

ma8020

Beethoven X opted to go down a different path. Rather than rewarding token locking, the protocol incentivizes the growth of positions over time, with rewards and voting power increasing with maturity, hence the name maturity adjusted (ma). This mechanism rewards those actively participating in the protocol for the longest duration with the greatest voting power.

Maturity is split into various levels, each of which corresponds to different incentive and voting power reward distributions. Once the highest maturity level is achieved, users unlock the maximum governance power and liquidity mining rewards.

Additionally, the underlying technology utilizes fNFTs as receipt tokens to unlock an additional level of composability. Users stake their 80/20 BEETS/FTM BPTs but in the place of typical ERC-20 receipt tokens, userss are issued an evolving financial NFT known as a relic. This relic tracks position maturity and even unlocks opportunities such as secondary markets, where mature positions can trade at a premium.

RELIQUARY — Everything Everywhere All At Once!

Alongside the multitude of benefits that a ve8020 or ma8020 position brings, protocols looking to join the initiative unlock some exciting opportunities with the ability to choose one of the routes below to ensure incentives flow to the LP position on the DEX.

  • Balancer 8020 LaunchPad
  • Core pool designation

The 8020 LaunchPad

To help facilitate the initial growth and development of protocols adopting this evolved governance position, Balancer offers a BAL grant to bootstrap adoption. The initial grant available is 25k BAL; if all milestones are met, the cumulative grant available is 250,000 BAL.

The grant application is dependent on:

• Project track record

• Circulating market cap

• Trading activity

Introducing Balancer’s 80/20BPT Launchpad

This grant ensures protocols can grow their liquidity with an evolved governance position while simultaneously unlocking a steady stream of incentives for LPs. If a project is looking to apply for the launchpad grant, they can complete the following form to get in touch with Balancer

Core pool designation

A system that takes center stage in the balancer liquidity flywheel is the Core Pool mechanic. Until recently, core pools are pools in which 50% or more of the underlying assets in the pool are Yield Bearing. These pools have 65% of the protocol fees the pool generates recycled back into the pool as voting incentives, allowing the LP to fuel its own efficient and growing incentive program. With the introduction of the 8020 initiative, 8020 pools now also qualify to gain this status unlocking further benefits for protocols looking to implement the next stage in governance tokenomics.

Outro

The 8020 model represents a significant leap forward in protocol governance tokenomics; Increased liquidity, incredibly efficient incentive programs, asymmetric token exposure, minimized IL, and token hedging.

With a growing collection of prominent teams beginning to implement this technology, the 8020 Initiative is an interconnected and growing collective of protocols ushering in the next stage of efficient governance.

Are you looking to find out more? Jump into the notion pack below and join the initiative today.

The 8020 Initiative


The 8020 Initiative was originally published in Balancer Protocol on Medium, where people are continuing the conversation by highlighting and responding to this story.

Arbitrum: The Aura Of Growth

https://medium.com/balancer-protocol/arbitrum-the-aura-of-growth-452aef7d308

Symbiotic liquidity growth is primed to flourish on Balancer.

Since launching on Arbitrum, Balancer has become a pivotal piece of DeFi infrastructure on the chain. From Liquid Staked Token tailored composable stable pools with inbuilt rate providers and liquidity flywheel mechanics to innovative 8020 tokenomics that have allowed protocols such as Radiant to flourish with $40 million in liquidity that would have otherwise been locked in single staked contracts, Balancer Technology has enabled growth on Arbitrum to bloom.

Balancer on Twitter: “In less than 1 month,@RDNTCapital unlocked a governance position with over $40 million in liquidity generating $644,744 in swap fees for LPs, with $327,771 in protocol fees recycled back into the pool as incentives.This is the power of #ve8020.A 🧵 pic.twitter.com/tIjl9QlxWR / Twitter”

In less than 1 month,@RDNTCapital unlocked a governance position with over $40 million in liquidity generating $644,744 in swap fees for LPs, with $327,771 in protocol fees recycled back into the pool as incentives.This is the power of #ve8020.A 🧵 pic.twitter.com/tIjl9QlxWR

Today, with a new luminous liquidity layer and strategic ARB incentive program, we stand at the frontier of the next stage in Balancer’s evolutionary Arbitrum journey. Take a deep breath. Center yourself and align your chakras. A purple hue of energy is radiating into the Arbitrum ecosystem to allow growth to flourish.

Symbiotic Liquidity Growth

One of the fundamental goals for all blockchain networks is liquidity growth. Whether technical or biological, all ecosystems require growth to prosper. It’s this growth that powers progression, this progression that leads to evolution, and this evolution that kindles ecosystem prosperity. In the blockchain sphere, it all starts with network participants requiring efficient, decentralized, and nourishing opportunities to facilitate the ongoing growth of liquidity.

At the very core, Balancer believes that growth is exponentially multiplied when ecosystem participants work symbiotically versus competitively. Symbiosis trumps extraction. But it’s more than just an ethos, it’s ingrained in the code. Balancer architecture has been purposefully engineered to provide an interconnected hub of assets, all interwoven into a single contract. The Vault, Batch Swaps, Smart Order Router; there is a seamless and gas-efficient flow of liquidity and connections that constantly ebb and flows through this attuned base layer.

A Neural Tech Stack

Much like a decentralized mycelial network that churns away under the soil unbeknownst to all, it’s this interwoven architecture that nourishes growth and allows the beauty to flourish up above. On the surface, Balancer provides participants with optimized tools to plug into this interconnected, underground neural tech stack. Whether protocols leverage the plethora of base pool types or seek to innovate, build and implement their unique custom logic such as Gyroscope’s E-CLP, Balancer allows all network participants to seamlessly plug in and play.

Balancer on Twitter: “Concentrated Liquidity is now LIVE on Balancer!Built by @GyroStable and in collaboration with @LidoFinance, combine your $MATIC LSTs into a CL pool supercharged with 7x efficiency that requires no rebalancing!This is only the start.#builtonbalancerA 🧵 pic.twitter.com/qaji4u2qdn / Twitter”

Concentrated Liquidity is now LIVE on Balancer!Built by @GyroStable and in collaboration with @LidoFinance, combine your $MATIC LSTs into a CL pool supercharged with 7x efficiency that requires no rebalancing!This is only the start.#builtonbalancerA 🧵 pic.twitter.com/qaji4u2qdn

If Balancer technology is the interconnected mycelial network, and protocols are flourishing microcosms, then Aura is a radiating, purple solar energy set to feed further growth. With the launch of Aura Finance onto Arbitrum, all Balancer participants now harness a newfound energy source that allows ecosystem-wide growth to blossom.

Aura Finance

Aura Finance is an aligned and symbiotic liquidity layer that plugs into and builds off the Balancer protocol. Just like Convex does to Curve, Aura acquires Balancer’s native governance token, veBAL, and plays a pivotal role in providing network participants with an additional composable layer to build liquidity and incentivize liquidity pools. Liquidity providers can stake Balancer Pool Tokens (BPTs) to earn AURA incentives, AURA holders can stake and participate in the veBAL voting market, and protocols can offer voting incentives to efficiently incentivize pools with BAL (and AURA) emissions.

Aura on Twitter: “Ready to supercharge DeFi on @Arbitrum!Here’s how Aura will take ahold of the ecosystem.A thread.🧵 pic.twitter.com/zuIwDuEgUW / Twitter”

Ready to supercharge DeFi on @Arbitrum!Here’s how Aura will take ahold of the ecosystem.A thread.🧵 pic.twitter.com/zuIwDuEgUW

Aura Finance hosts nearly $500M in TVL on mainnet and has established and helped fuel an interconnected cohort of protocol-protocol collaborations. From Liquid Staked Token powerhouses and cross-chain infrastructure providers to lending market and boosted integrations, Aura has played an innovative role in empowering the diverse Balancer ecosystem on Ethereum.

By launching on Arbitrum, all ecosystem participants now harness a source of energized liquidity tools to facilitate growth. But it doesn’t stop there. Entangled within the launch of Aura onto the network, Balancer is initiating an innovative, rewarding, and efficient ARB incentive program.

The Balancer ARB incentive program

For all external protocols looking to grow liquidity on Balancer, the voting market provides an efficient means to incentivize pools and instigate ongoing liquidity growth flywheels. Historically, the resultant emissions flowing to LPs via protocols depositing voting incentives have been greater than the voting incentive itself. This mechanism has allowed protocols to bootstrap liquidity through extremely efficient incentive strategies.

On Arbitrum, the Balancer DAO was allocated 3M ARB tokens via governance. 2 million of these will flow into the 33/33/33 ARB/BAL/AURA Liquidity Pool to facilitate swaps on the network. The remaining 1 million will flow to Liquidity Providers via an innovative incentive program strategy.

This incentive strategy will see ARB paired 1:1 as direct liquidity mining incentives with any voting incentives placed on the Aura finance voting market up to a maximum of 10k ARB per round. This means that on top of the portion of BAL incentives protocols participating in this voting market receive (which have historically been greater than the voting incentives placed), Balancer will also match voting incentives with direct ARB Liquidity Mining incentives. The full structure is outlined below.

  • 10-round duration, aligning with Aura’s two-week cycle of voting incentive allocations.
  • Max of 100k ARB per round. Any unspent ARB returns to the treasury.
  • Each pool can have a max possible allocation of 10k ARB per round to prevent one or two pools from taking the majority share of this program.
  • On each Wednesday/Thursday after Aura’s gauge voting snapshot, ARB will be allocated to each Arbitrum pool according to bribes placed in the most recent round on a 1:1 USD basis, subject to ARB caps mentioned above.
  • This ARB will be emitted over two weeks.
  • All voting markets are included — projects can choose where to bribe at their discretion. Bribes placed by Balancer under BIP-19 also count.
  • Balancer Maxis will publish a spreadsheet detailing the ARB allocation every two weeks and allow at least 24h for community feedback before execution. They will make a forum thread for this purpose.

In collaboration with Aura Finance, Balancer Technology now provides one of the most efficient liquidity layers to fuel growth for Arbitrum participants.

Outro

Balancer is an ecosystem of diverse, active, and vigorous microcosms humming away in synchronicity. With the launch of Aura onto the network and an ARB incentive sprinkled into the mix, a newfound energy source is primed to fuel further growth and prosperity on Arbitrum. Efficient liquidity flywheels, protocol-protocol symbiosis, and exhilarating technological developments, get ready for the stage in Balancer’s evolutionary Arbitrum journey.

Aura Finance


Arbitrum: The Aura Of Growth was originally published in Balancer Protocol on Medium, where people are continuing the conversation by highlighting and responding to this story.

Balancer is fuelling growth on …

https://medium.com/balancer-protocol/balancer-is-fuelling-growth-on-polygon-zkevm-424f209a6be4

Polygon Labs has recently launched its zkEVM Mainnet Beta in its first step to exponentially improve the scalability and finality of Ethereum with an EVM equivalent Layer 2 ZK scaling solution. As an essential and notable piece of DeFi infrastructure, Balancer is deploying its technology onto the network to bootstrap liquidity growth and accelerate development across the ecosystem.

Ethereum L2 scaling solutions

Providing the web3 world with a decentralized computational network, Ethereum has seen a rapid increase in network activity and development throughout the past few years. As growth inevitably continues, ensuring transaction costs and finality stay optimized without faulting on security and decentralization has proven to be a focal point for the next stage of Ethereum’s development.

Layer 2 solutions are designed to help solve this scalability dilemma by batching and processing computational transactions on a separate layer and submitting the compressed rollup as one single transaction to the Layer 1 network. This mechanism effectively spreads the cost of a single Layer 1 transaction across multiple Layer 2 transactions, ensuring cheaper gas fees and faster throughputs for both chains.

While there are ongoing and exciting blockchain developments such as Proto-danksharding to effectively scale the network, many people believe Ethereum’s decentralized and secure infrastructure will be utilized for data storing, while the majority of transactions will be processed on Layer 2’s. We have already seen a rapid rise in activity and development on Ethereum L2 Optimistic Roll-Ups such as Arbitrum and Optimism, as well as side chain implementations like Polygon POS with nearly $4 billion of Liquidity deployed across all three chains. Zero Knowledge proofs are the latest up-and-coming technology that is gaining rapid attention.

Zero Knowledge Proofs

Quite the mind bender, a zero-knowledge proof (ZKP) is a cryptographic action in which one party can prove to another party that they can verify or prove knowledge without revealing any information about the knowledge itself. This magical action makes them extremely efficient, secure, and scalable. Intertwined in a Layer 2 network, they offer some exciting opportunities.

With this ‘mind reading’ ability to prove validity, the main difference between Optimistic and ZK rollups is the process in which they validate transactions. Optimistic Rollups such as Arbitrum and Optimism do not prove transaction validity and instead assume “Optimistically” that all rolled-up transactions are valid, participants are then able to question the submitted validity of transactions with fault proofs within a challenging week window of transaction finality. Alternatively, zk-rollups validate all transactions with cryptographic Zero-Knowldge proof.

How come we haven’t seen ZK ecosystems expand at the same pace as Optimistic rollups?

As with any new technology, the developmental process takes time, especially when the new technology is as mathematically complex as ZK proofs. An additional hurdle has been the inability to seamlessly integrate with Ethereum. The Ethereum Virtual Machine (EVM) wasn’t designed to work with zk-proof-computation. Executing complex transactions like smart contracts with zk-proofs is an extremely hard task and requires additional technology to integrate. This is where Polygon Labs is spearheading a solution.

zkEVM

zkEVM combines Zero Knowledge Proof Computation into an EVM equivalent Layer 2 to offer users and developers a seamless cryptographically prooved scaling solution. Polygon Labs believes this technology is primed to offer the same code and apps but with better performance, higher throughput, lower latency, and lower cost than alt-L1s, optimistic, and other ZK-Rollups.

Sandeep Nailwal | sandeep. polygon 💜 on Twitter: “What it means is proving cost per txn on @0xPolygon is now $ 0.000058. This makes zk proving costs almost negligibleSo you now have extremely cheap cost txns with <5mins exit times to L1, no need to wait for 7 days. Its hard to ignore why @0xPolygon #zkEVM is going to be the… https://t.co/K0HPPJgXcM / Twitter"

What it means is proving cost per txn on @0xPolygon is now $ 0.000058. This makes zk proving costs almost negligibleSo you now have extremely cheap cost txns with <5mins exit times to L1, no need to wait for 7 days. Its hard to ignore why @0xPolygon #zkEVM is going to be the…

As a notable protocol, and with a bustling ecosystem with means to efficiently bootstrap liquidity across the network, Balancer is launching on Polygon zkEVM!

The Balancer Ecosystem LaunchPad

Balancer is uniquely positioned as a prominent protocol to help facilitate network-wide liquidity growth on Polygon zkEVM. Whether symbiotic and interconnected boosted pools that bootstrap swap liquidity and lending markets simultaneously or efficient 8020 pools that unlock the next generation of protocol governance positions, Balancer technology hosts core infrastructure that facilitates liquidity growth for every chain. As Ethereum looks to take the next step in its Zero-Knowledge future, Balancer is primed to help ignite its growth.

LST Liquidity Flywheel

Since the successful Ethereum Shapella upgrade, users have harnessed newfound freedoms to seamlessly stake and withdraw capital from the network. With it, a vast degree of complexity and uncertainty has been removed from the system. The outcome of this is that in just 2 months, there has been an inflow of 3,380,524 ETH staked onto the network, with the current ratio of ETH on the network at an all-time high of 19.04%. With this reduction in risk profile, Liquid Staked Protocols have seen an influx of liquidity as users actively seek staked yield exposure hosted within a liquid and composable token.

Balancer technology offers these protocols an extremely efficient and unique cohort of technology to facilitate this ongoing growth of Liquidity. Compared to a typical stable pool that most DEXs implement for these tokens, Composable Stable pools are programmatically tailored to ensure that the full power of these Yield Bearing tokens flows to Liquidity providers. How? Composable Stable Pools harness an inbuilt rate provider that constantly queries the blockchain, updating the token to the correct ratio and feeding the yield accrual back to liquidity providers. Without rate provider technology, the two assets trade at 1:1 with any appreciation in staking yield leached out to arbitrage traders.

This innovative technology also unlocks an incredibly efficient Liquid Staked Token incentive flywheel. With the benefits of these tokens actually flowing to users, Balancer can take a fee on this otherwise lost advantage. Integrated into a strategically implemented core pool mechanic, this fee is then fed back into the pool as voting incentives igniting a flywheel of efficient and ongoing liquidity growth.

Balancer on Twitter: “In less than a year, Balancer tech has helped facilitate a 20x growth in $rETH liquidity on @ethereum.Igniting rapid liquidity growth across the ecosystem, discover why Balancer is primed to become the Liquid Staked Token (LST) hub of DeFi.A 🧵 pic.twitter.com/mZTvm6b3E3 / Twitter”

In less than a year, Balancer tech has helped facilitate a 20x growth in $rETH liquidity on @ethereum.Igniting rapid liquidity growth across the ecosystem, discover why Balancer is primed to become the Liquid Staked Token (LST) hub of DeFi.A 🧵 pic.twitter.com/mZTvm6b3E3

Built to scale and grow the Ethereum ecosystem with cheaper and faster finality, Polygon zkEVM is primed to host a hub of LST liquidity and Balancer Technology is positioned to play an important part in enabling users to obtain exposure to the benefits of these tokens.

Boosted Pools

Boosted Pools intertwine the power of Liquidity Pools and single-sided yield markets into one powerful LP position. In a typical Liquidity Pool, less than 20% of the liquidity facilitates swaps, Boosted Pools wrap and route idle liquidity to external yield-generating protocols, unlocking an additional source of sustainable Liquidity Mining incentives for users.

But this unique pool type offers far more:

  • Optimized swap routing
  • Nested interconnectivity
  • Protocol — Protocol liquidity symbiosis

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A brilliant example is Balancer Boosted Aave V3 USD on Ethereum. This Tri-Stable Boosted USDC/USDT/DAI pool offers protocols instant access to efficient swap paths for multiple USD tokens at the onset of pairing alongside an additional boost in efficiency for users. Furthermore, with the power of the boost building of the benefits of swap fees, pool parameters become far more flexible.

This bb-a-USD stable pool has recently been tweaked for volume generation. In one day, the pool facilitated $94,924,281 in swaps at a 1055.70% Utilization rate!

Via actively growing trading liquidity alongside aiding lending market growth, this technology is uniquely positioned to help bootstrap growth on any new chain that integrates it. On Polygon POS, over $20 million of MATIC liquidity was routed to Aave from both Boosted stMATIC and maticX boosted pools. With it, Aave’s 66 million MATIC supply cap, 30 million stMATIC supply cap, and 17.2 million xMATIC supply cap were all hit.

Boosted Pools play a powerful role in facilitating token growth across the whole ecosystem and Balancer is primed to help enable this on Polygon zkEVM.

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The 8020 Initiative

Noticing the shift in the governance tokenomic tides, we are starting to witness a new governance paradigm entering the space. With the adoption of multiple notable protocols, Balancer is proud to bring the next stage in efficient and streamlined protocol governance technology to Polygon zkEVM — 8020.

The majority of DeFi protocols implement a native token single-sided staking mechanism. Governance tokens are acquired and staked in return for governance voting power, and while incentivizing single-sided staking successfully increases governance participation, it effectively reduces the circulating supply available for swaps as more liquidity is staked. As a result, a smaller portion of capital is supplied to liquidity pools and this lack of liquidity leads to several issues:

  • Increased slippage
  • Inability to facilitate larger trades
  • Higher price volatility for the underlying tokens

To address these challenges and encourage swap liquidity growth, protocols often resort to providing additional incentives for their token, not only to multiple liquidity pools but also across multiple decentralized exchanges. This action entangles protocols in an inefficient, expensive, and complicated incentive program. Combined with vote escrowed mechanics, this drastically locks away the majority of a token’s available supply to swap.

8020 solution

By leveraging Balancer weighted math, protocols can implement a two-asset pool with 80% of one asset and 20% of another. The 8020 initiative proposes using this 8020 pool BPT token as the governance token instead of a single token, with a pool configuration of 80% of the protocol’s native token paired with a chain’s native token (ETH) or a highly liquid stablecoin such as USDT or USDC.

This model hosts a range of benefits including:

  • Deep Liquidity
  • Asymmetric upside and reduced impermanent loss
  • Efficient incentive programs
  • Hedging and price appreciation

By utilizing a liquidity pool BPT for governance an additional stream of incentives automatically presents itself — Swap Fees. Every time a trade takes place on the protocol, a swap fee is denominated in the pool’s respective BPT. Take Radiant Capital as an example. After adopting the 8020 model and drawing in a TVL of almost $43M, the pool facilitated 44,046 swaps and generated $644,744 in swap fees in the first 28 days. To date, Liquidity Providers have earned an additional $751,529 that would never have been possible with a single-staked model.

JavaScript is not available.

What’s more, via combining the 8020 BPT into a Vote Escrowed position, protocols can leverage an extremely concentrated source of liquidity that only requires a singular focal point of incentivization. Whereas every vote escrowed single staked position is effectively making liquidity redundant for trading, ve8020 has the opposite effect. Every time users lock into governance positions trade liquidity increases!

This is taken one step further with Balancer’s core pool mechanics and BAL grants. The 8020 initiative is at an inflection point for continued growth and adoption, and with the deployment onto Polygon zkEVM, the network is primed to offer protocols the next stage in DeFi governance positions.

Build

Code Less. Build More. Balancer is a powerful base layer that allows other protocols to innovate effortlessly. Developers can streamline the building process saving time and resources while harnessing an interconnected hub to support the launch of any primitive. Look at Gyroscope; the protocol built a unique E-CLP concentrated Liquidity model with the optimized Balancer tech stack. The pool instantly plugged into all existing Balancer liquidity and has facilitated $4,100,262 in concentrated swap volume since deployment.

Balancer on Twitter: “Concentrated Liquidity is now LIVE on Balancer!Built by @GyroStable and in collaboration with @LidoFinance, combine your $MATIC LSTs into a CL pool supercharged with 7x efficiency that requires no rebalancing!This is only the start.#builtonbalancerA 🧵 pic.twitter.com/qaji4u2qdn / Twitter”

Concentrated Liquidity is now LIVE on Balancer!Built by @GyroStable and in collaboration with @LidoFinance, combine your $MATIC LSTs into a CL pool supercharged with 7x efficiency that requires no rebalancing!This is only the start.#builtonbalancerA 🧵 pic.twitter.com/qaji4u2qdn

Outro

With Zero-Knowledge proofs integrated into an EVM equivalent network, Polygon zkEVM is paving the way for the next iteration in the continued growth and scaling of the Ethereum ecosystem.

Balancer is united in the network’s efforts to offer users and protocols a seamless and interconnected experience. Alongside a budding community, the Polygon zkEVM network can now harness Weighted Math, Boosted Pools, 8020, and an efficient LST liquidity hub!


Balancer is fuelling growth on … was originally published in Balancer Protocol on Medium, where people are continuing the conversation by highlighting and responding to this story.