veBAL is financially beneficial to lockers in 3 ways:

• Boosting BAL incentives for staking BPT's (Balancer Pool Tokens)

• Protocol Revenue Distribution

• Allocating Liquidity Incentives via Gauge Voting system

Gauges will be voted for through mainnet only, here delegation of BAL incentives can be done across all chains and gauge approved pools.

Users can view the current pools eligible for gauge voting here. Interested in proposing your project's token to be eligible for voting? Check out the instructions page on our forum.

A common obstacle faced by users of vote escrowed systems is the inability to lock their token in the time based veBAL contract. For safe users this would mean no access to veBAL governance or boosted liquidity pool incentives.

If you would like to delegate your veBAL boost to another address, you can do so by calling the create_boost function on the veBAL veboost contract https://etherscan.io/address/0x2E96068b3D5B5BAE3D7515da4A1D2E52d08A2647#writeContract

// code
_delegator = your address which has veBAL,
_receiver = your address you want to boost
_percentage = 5000 // 50% (10000 is 100% of your boost)
_cancel_time = 0 // allow yourself to cancel anytime
_expire_time = 1651363200 // unix timestamp for 1st 
of may (Check this! Also your lock needs to last past this time)
_id = 0,

This is useful for situations where you are LP'ing from a contract like a gnosis safe which, because it's a contract, is incapable of locking of veBAL. Instead, you lock up veBAL from an EOA and delegate your boost to your gnosis safe.

Note that the percentage is flexible over the complete range of boost which you would like to delegate.

Vyper_contract | Address 0x2E96068b3D5B5BAE3D7515da4A1D2E52d08A2647...

As opposed to the initial liquidity mining incentives where a liquidity provider receives incentives based only on their share of the total liquidity, we will now implement a multiplier based upon the time locking mechanism. Locking the same amount of BPT for a longer period will yield a higher incentive multiplier for a user.

Please note the maximum boost possible for liquidity mining incentives is 2.5x. See here how to calculate your boost.

The boosting mechanism theory is visualized by the graphic below. The fraction of a pool's working supply a user owns is based on upon their share of their respective pool, and their share of total veBAL. Continue reading through this boosting sections for further information on the working supply.

Based upon this new mechanism locking the same number of tokens for twice as long as someone else will result in twice the voting strength. The boosting proportion and more additional benefits are coupled with wielding that strength, however they are not as directly proportional.

Special thank you to Baller, zekraken, for deconstructing the contracts & code to make calculating boost easily accessible to the Balancer community.

Reference link the boosting graphic in more detail.

To calculate a users boost the process from the Maximum Boost section will be used considering the veBAL holdings user has.

First we must calculate the user's working supply:

This would mean the minimum or “non-boosted” supply a user could have is the following, assume no veBAL is owned.

The boost a user receives is the the ratio of their working supply over the new total working supply, divided by the minimum case of their working supply entering a pool.

In the case of already being in the pool and depositing further liquidity, the following adjustment must to be made to consider the working supply a user already holds a given pool.

Under certain conditions, specifically larger liquidity deposits, a maximum boost of less than 2.5x becomes apparent. The logic behind this is that there is only a finite number of incentives going to a pool, for example 10,000 BAL. Regardless of boosting, the pool's 10,000 BAL is distributed to the staked liquidity providers, boosting is a factor in which LP’s receive different portions of the incentives.

i.e. the pie is the same size but the slices are cut differently

The liquidity in terms of how much veBAL correlates to it what is called a working supply. The working supply can range from 40% to 100% of a user’s staked liquidity position. This is the main theory behind how rewards are distributed. The equation below defines a user’s working supply. (see variable list here)

This would mean the minimum or “non-boosted” supply a user could have is the following, assume no veBAL is owned.

In turn, the maximum working supply possible is defined as the following:

To determine the maximum boost possible for a pool we must compare a user’s non-boosted and maximum working supply to the working supply the pool already has in place.

The pool’s working supply is the sum of all the liquidity providers working supplies prior to the deposit of a new user’s working supply.

The maximum boost possible for a user will be the ratio of their portion of max working supply plus the pools total working supply, divided by their portion of minimum working supply plus the pools total working supply. Please note the pools total working supply used here is prior to the user’s deposit.

Please note if a user has a working supply in a pool already, this must be subtracted total working supply in both the numerator and denominator of the equation a shown below.

The variables to consider when calculating veBAL incentives boosts are the following:

• The Liquidity you will provide and stake: l

• The staked liquidity in the pool before you deposit and stake: L

• The liquidity in the pool after your deposit and stake: L' = L + l

• The total veBAL in circulation

• The amount of veBAL you hold

A common question is what is the minimum number of veBAL a user needs to hold in order to receive the maximum boost. To calculate this value:

While this does answer what the minimum amount of veBAL is need for maximum boost at one point in time, we must consider what happens over time. if a user has the minimum veBAL required to receive maximum rewards and then more veBAL is minted, this means I will no longer be receiving the maximum rewards due to dilution of the Total veBAL.

To the opposite point, as more liquidity enters the pool your boost may increase, but net rewards decrease, while this is less critical one may require less veBAL if the portion of the pool they own decreases. Therefore, it is up to the user’s discretion how much veBAL they would like to hold.

See here how to calculate the maximum boost one can receive from an investment.

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 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 .

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.

Background

Gauge voting has been implemented by Curve finance to give their governance token control over financial outcomes. This delegates a much larger amount of power to token holders and amplifies the meaning of governance by a new magnitude.

Balancer Protocol is adopting this same method of governance and is confident not only from Curve’s outcomes but also from the more comparable friendly fork of Balancer, BeethovenX. By giving a financial power of control to the governance token it not only becomes more desirable to hold it can be utilized as an asset that other protocols wish to control the outcomes of as well.

The initial use case of the gauge voting system is to allow governance token holders, in this case veBAL, the ability to select the pools they are invested in to receive liquidity mining incentives for the next epoch. This eventually transformed when projects would bring their liquidity to Curve or Beethoven and would then bribe the holders to vote for the pools which would benefit the protocols. This has proven to be financially sound for the protocols which are doing the bribing because their token’s pools receive incentives for only the cost of their bribe.

How it works

Gauges will be voted for through mainnet only, here delegation of BAL incentives can be done across all chains and gauge approved pools. Users do not need to vote each week if they will maintain the same delegation as the previous. Voting is only needed once, and then again if a change in selected pools is done.

Users can view the current pools eligible for gauge voting Interested in proposing your project's token to be eligible for voting? Check out the page on our forum.

A key note here is that veBAL can vote for the gauge of veBAL itself. This is capped at 10% of total emissions of BAL at a given time in the inflation schedule. The overflow, if a vote goes over 10%, will go to the DAO treasury, where governance will have ownership of it.

External veBAL Incentives

The potential for external incentives or cross project incentivization, also known as "bribing" is a common byproduct of gauge voting systems. How this benefits veBAL holders and the projects which choose to influence their votes is described below.

To be clear, “Project A” will give a veBAL holder their project’s tokens to use their voting strength to incentivize “Project A’s” pool with BAL liquidity mining incentives. Typically, “Project A” will offer a lump sum to all those who vote for their pool.

After the voting is completed, this lump sum is then divided amongst the votes proportionally and distributed to those who voted for “Project A’s” pool. This means the more veBAL you hold the more bribes you can be entitled to. On the flip side, the more votes “Project A” attracts with their bribe, the more liquidity mining incentives their pool will receive.