Key Points

  • DeFi Protocol Balancer may soon adopt a voting escrow system similar to the one pioneered by Curve Finance.
  • Fernando Martinelli, CEO and co-founder of Balancer Labs, presented a proposal that introduces a voting escrow token called veBAL.
  • BAL is up 11.2% after the update.

Balancer is considering implementing a voting-hosted token model for the Balancer protocol.

Balancer looks to follow Curve tokens omics

Balancer noticed the curve war.

The pioneering DeFi protocol is considering a model of token economics hosted by voting similar to the one promoted by Curve. If implemented, this system would enable BAL holders to lock their tokens for a period of time in order to receive an anchored "VE" token, in this case veBAL.

The development team behind Balancer Labs has considered adopting a voting escrow system to improve its existing token economics, according to a proposal made Thursday by the project's CEO and co-founder, Fernando Martinelli. Currently, BAL holders can vote on proposals with their tokens, but there is no lock-in mechanism of any kind. In the proposal, Martinelli said that Curve's token economics "seem to fit well with the Balancer protocol.

Curve introduces the VE token, which provides CRV holders with higher returns, a portion of the protocol revenue, and the right to vote on governance proposals. Access to voting power is particularly noteworthy as it can be used to determine decisions such as the amount of liquidity mining rewards allocated to individual mining pools.

The token economics model of voting escrow is the driving force behind the so-called "Curve Wars" – an ongoing DeFi battle in which protocols compete to increase CRV, lock it into veCRV, and try to gain influence over Curve voting rights in order to gain more rewards for their subscribers. Curve Wars is effectively a liquidity capture game in which protocols compete to acquire as much CRV as possible to manage the program, and Curve strengthens its position in the top ranks of DeFi.

If passed, the proposal would introduce veBAL as the primary asset to vote on future proposals. The new system could help Balancer follow Curve's lead and potentially drive demand for BAL tokens. Interestingly, Yearn Finance has also recently adopted a voting escrow system for YFI.

It is worth noting that Balancer's proposal is slightly different from the one introduced by Curve. While Curve allows users to lock CRV in order to receive veCRV, Balancer users must obtain a Balancer pool token from the protocol's BAL/ETH pool in order to receive veBAL. Balancer Pool tokens are issued to liquidity providers on Balancer; they represent the user's share of the pool.

The market seems to be responding well to the proposal, even though it has not yet passed. BAL is up 11.2% today.

Disclosure: At the time of writing, the author of this article owns ETH and other cryptocurrencies.