What is @Balancer's ve8020 and why should you care?
Builders, investors and degens...
here's your ultimate guide to #ve8020.
Will your $BAL bags == 💰? (1/20) 🧵
This thread will be split into 4 parts:
1️⃣ @Balancer, ve8020, and what they are trying to solve [3-7]
2️⃣ Traction [8-11]
3️⃣ Why it matters to you [12-13]
4️⃣ Personal thoughts [14-16]
1️⃣ @Balancer, ve8020, and what they are trying to solve.
Balancer is an OG DEX that can support up to 8 tokens and custom weights in a pool, unlike the usual 50/50 split between 2 assets.
8020 refers to Balancer's LP tokens (BPTs) that consist of 80% token A and 20% token B.
ve8020 is the usage of 8020 BPTs (80% project's token and 20% base asset) as the staking mechanism for governance in a project.
The typical mechanism is single-sided staking the project's token, and some have begun integrating V2 LPs (e.g., UniV2, SushiV2, etc.) too.
The benefit of accepting LP tokens over single-sided staking is that the project does not need to spend as much on incentives to bootstrap their DEX liquidity.
Moreover, stakers earn trading fees while staking their LP tokens.
All good, right? Well, not exactly.
LP stakers are exposed to impermanent loss (IL).
More often than not, trading fees alone cannot compensate for IL.
80/20 BPTs reduce IL as it's not an even split -- stakers get more exposure to the project's token, which is in line with what stakers want.
The ve8020 initiative is a movement by @Balancer to incorporate ve8020 into the project's default governance system.
Two birds, one stone: governance and liquidity in one go.
8020 is ideal for building a long-term base liquidity.
2️⃣ Traction
Here's a list of protocols with ve8020 integrated:
@Balancer, lol
@RDNTCapital
@y2kfinance
@paraswap
@AlchemixFi
@unsheth_xyz
@OATHFoundation
@ArchimedesFi
@Timeless_Fi
Not the whole list, and I'm sure the list won't stop expanding.
Notable ones being @Balancer and @RDNTCapital.
They're proven cases that ve8020 works to build deep ass liquidity.
@Balancer 's veBAL
On Ethereum, their ve8020 mechanism has amassed $190mn in DEX liquidity.
Some more interesting stats:
dune.com/balancerlabs/veBAL
IL > Fees by 15% (since inception).
Stats:
app.apy.vision/pools/balancerv2_eth-BAL-WETH-pool-0x5c6ee304399dbdb9c8ef030ab642b10820db8f56
@RDNTCapital 's dLP stakers
On Arbitrum alone, their ve8020 mechanism has amassed $50mn in DEX liquidity.
Fees > IL by 2% (since inception).
The recent hype around $RDNT really helps in driving more buy pressure (thus fees).
Stats:
app.apy.vision/pools/balancerv2_arbitrum-RDNT-WETH-pool-0x32df62dc3aed2cd6224193052ce665dc18165841
3️⃣ Why it matters to you
As ve8020 gets adapted, fewer emissions will be needed for the typical project to function. Increasing sustainability (at least smoler Ponzi).
This also means that Balancer's TVL and volume will pump. Driving profits to veBAL (and BAL) bagholders.
To protocols, ve8020 is worth exploring over single-sided staking.
Migration might cause sell pressure on your token.
Balancer offers a launchpad for integration: snapshot.org/#/balancer.eth/proposal/0x3708b9fcb085bccc6ebb9e9708c6e45528a85b22483da9bbdcc0b606103429fb
If your pool qualifies as a core pool, fees will be recycled as voting incentives!
4️⃣ Personal thoughts
For governance, ve8020 >> ve5050.
For liquidity, 5050 (and V3) >> ve8020.
Just thinking out loud, but what about a model that has caps on the ve8020 and allows single-sided staking too?
The RNDT/WETH UniV3 pool is doing 5x more volume despite having only 4% of the liquidity (as per Jul 28).
This doesn't stop the fact that a deep V2-based pool is necessary for any pair (esp. volatile ones) to ensure an even spread of liquidity.
Another great thing about ve8020 is the decrease in overall emissions (thus dilution), which wasn't accounted for in the IL vs fees comparison.
If projects with ve8020 develops receipts for their governance, it's gonna be even crazier. Imagine ve8020 as collateral. 🤫
Resources:
balancer.notion.site/The-8020-Initiative-999c0a6e1f774e39b02f26b11c581714
medium.com/balancer-protocol/the-8020-initiative-64a7a6cab976
twitter.com/Balancer/status/1681319972994453506
twitter.com/Cryptovoxam/status/1678584931826679808
Thanks for your support frens ❤️
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mimi
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(images by @midjourney) Just sharing what we're curious about, in simple English -- NFA.