Protocol Revenue Distribution

Balancer Protocol generates revenue through swap fees, learn how veBAL holders benefit from the trading done on the platform.

Protocol revenue has become a common vehicle for AMM’s to accumulate a treasury of assets as well as redistribute the profits of trading on to their governance token holders. Balancer Protocol is adapting this mechanism in their own form.

In a recent governance vote the protocol fee was increased to 50% of all swap fees as noted here. This means all pool revenues on Balancer are being split in half. Half of the swap fee value is going to the protocol revenue and the other half is directly accumulated by the liquidity providers in each pool.

While a liquidity provider may not notice a large difference in profitability, often in the realm of 0 – 2% APR is being accumulated by the protocol. This is not negligible however in terms of APR majority of liquidity provision is incentivized by liquidity mining incentives.

Regardless this value adds up across the entirety of Balancer Protocol. Of the 50% which is protocol revenue 75% will be distributed back to veBAL holders, based on their share of all veBAL in each epoch. The flow of protocol revenue from swap fees is depicted below. Without revenue share activated on a pool the "Fee Splitter" is bypassed. To understand revenue share for partner's read more here.

To be blunt if the swap fees for a given epoch equate to 1,000,000 USD equivalent, the protocol share will be 500,000 USD, meaning the DAO treasury will receive 125,000 USD and veBAL will have 375,000 USD distributed amongst them. This example is only for calculation, not a financial guarantee or promise.