The BAL 8020 Standard

Balancer has come to market with a brand new governance standard that could potentially drive a ton of TVL and volume to Balancer. Balancer’s new standard, called 8020, extends the functionality of Balancer’s existing governance system to any project that wants to use it. For their governance token, Balancer uses an 80/20 liquidity pool token from a BAL/ETH pool. The 80/20 BPT token means that to participate in Balancer governance, BAL holders must provide liquidity in the Balancer’s BAL pool and stake their LP tokens, giving them fees from swaps as an additional incentive.

Balancer extends this functionality to any protocol that chooses to use it. If a protocol adopts it, its governance would require users to provide liquidity for the governance token on Balancer’s DEX. Balancer also offers additional functionality by integrating VE and locking period mechanics into their 8020 pools. Now, Balancer just needs protocols to show up to use it.

8020 is a solid idea and could be a game-changer for Balancer. Uniswap and Curve often overshadow Balancer as a DEX – they have had issues attracting the same level of TVL and volume as the others. But if protocols adopt 8020, much TVL and volume could follow. Suppose protocols use 8020 BPTs as their governance token. In that case, they do not need to incentivize other pools, as 8020 could help concentrate deeper liquidity in a single pool rather than spreading it out throughout different DEXs. Protocols could channel incentives and swap fees to their 8020 pool and even lock some liquidity in with VE mechanics. If protocols adopt 8020, Balancer could become the main DEX-for-protocols. A few protocols have signaled interest, Alchemix in particular, but I expect to try it out more as Balancer has said they could potentially create some incentives for 8020 adoptions. And, of course, more pools, more volume, and more TVL for Balancer could be a boon for the BAL token.

Whether or not protocols show up to try 8020 is a big unknown. Balancer is one of those projects that probably doesn’t get the credit it deserves but has made some significant strides nonetheless. 8020 could be exactly what they need to attract users and TVL – only time will tell. From a governance perspective, I like the 8020 standard. LPs get a say in the protocol direction, earn swap fees, and, if protocols are smart, will also earn protocol revenue or other incentives. 8020 could deepen liquidity and fold important actors (liquidity providers) into the steering of a protocol.

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Cool post sir

Beyond the obvious "it helps build liquidity", trying to think through why this is better than vanilla "one-token-one-vote"

I think it introduces some weird mechanics. Balancer 80-20 pools auto adjust your tokens if you deposit a single asset. Meaning if you deposit 100% in one token, 20% of that is sold for the second token to keep the pool ratio balanced (reducing your exposure to the core asset)

To me, it seems like an unnecessary point of friction for governance (which is already very poor in turnout)

Any thoughts on why this is an attractive model? Happy to change my mind ofc!

You're right in that it adds a layer of friction. But arguably those who participate won't mind this extra layer.

To me this model is attractive because it helps spread the risk and upside in a more equitable manner. LPs take a lot of price risk for the protocol, arguably, they should also get some say in governance. Governance voters take some risk as well, and if there are no incentives for their voting. This model could allow you to consolidate incentives to target LPing and governance all at once.

The model has worked decently well for Balancer so far, but not sure if other protocols will like it.

I think the locking mechanisms are neat, but I am always cautious about mechanics that ask that users lock liquidity