The DeFi ecosystem of the ICON blockchain network has gotten another “boosted” token.
ICON’s decentralized exchange Balanced just launched its “Boosten BALN,” or “bBALN,” a vote-escrowed version of its BALN governance token.
Based on a popular model tested by some major DeFi solutions on other networks, bBALN seeks to “align rewards and voting power with those most invested in Balanced’s long-term success,” according to Balanced.
Let’s look at how bBALN works, and why this is a major step forward for both Balanced and ICON’s DeFi ecosystem as a whole.
bBALN: Balanced’s vetoken
The bBALN is a vote-escrowed token, or vetoken. We’ve discussed vetokens before, but let’s just recap.
While decentralized finance — or DeFi — has opened previously unimaginable opportunities for personal finance, DeFi platforms have suffered from underperforming governance tokens.
The reasons for this underperformance are actually quite simple: DeFi governance tokens have traditional conveyed no value other than governance rights, with inflating supply gradually eroding the value.
Vetokens aim to rectify this weakness by adding value to traditional DeFi governance tokens. Made popular by Ethereum DEX platform Curve Finance, vetokens make governance tokens worth your while, so to speak, by providing holders with a range of benefits, including increased voter rights and boosted yields, in return for locking up your tokens for longer periods of time.
In addition to adding value to governance tokens, vetokens benefit DeFi platforms by encouraging long-term decision making — the assumption being that when you’re committed for the long haul, you’ll vote accordingly — and by aligning the incentives among stakeholders such as liquidity providers and token holders.
The longer you lock, the more rewards you earn
With bBALN, Balanced offers you higher rewards the longer you lock up your BALN.
You can lock up your BALN for as little as a week to as long as four years.
For starters, there’s the bBALN token itself. The bBALN token is a non-transferable token that decays over time. The longer you stake your BALN, the more bBALN you receive. Here’s the official conversion rate:
- 1 week = 0.0048 bBALN
- 1 month = 0.0208333 bBALN
- 3 months = 0.0625 bBALN
- 6 months = 0.125 bBALN
- 1 year = 0.25 bBALN
- 2 years = 0.5 bBALN
- 4 years = 1 bBALN
In other words, if you lock up your BALN for the full four years, you’ll receive a full bBALN for every BALN you lock.
Your bBALN total decays linearly over time. This means if you lock up 10 BALN for four years, you’ll start off with 10 bBALN, but that will fall to 5 bBALN after two years, and to zero when the four-year lock-up period expires.
So, what benefits do bBALN holders receive?
Well, let’s begin with the obvious. The more bBALN you hold, the more weight you carry in voting on network proposals. Arguably, this is the most important role the new economic structure plays — giving long-term stake holders a greater say in governance.
But that’s not the only benefit it brings. The bBALN token also boosts your earning potential for BALN loan rewards and liquidity rewards — anywhere from 1 x to 2.5 x the base rate. Exactly how much bBALN you need to maximize your position depends on everyone else’s position, but Balanced’s intuitive app will calculate it for you, making things much easier.
Locking up BALN also gives you a cut of network fees. The more bBALN you have, the bigger your cut.
A word of warning, however. Balanced has included an “early unlock” option for bBALN, but it comes with a hefty penalty — 50% of your locked BALN. Think carefully before you choose a lock-up period.
A multi-stage approach
Balanced launched bBALN on Oct. 31 UTC. Among other things, this involved redirecting voting power and network fees to bBALN holders, and updating the rewards system for bBALN.
To make this easier for users, Balanced has paused network fees for seven days, i.e., until Nov. 7. Balanced encourages you to lock up your BALN before then to earn a cut of the fees over this week.
The three-day unstaking period for BALN has also been removed for the time being.
Locking up BALN is easy. Simply log in to Balanced, unstake any BALN you may have staked (you’ll be promoted to do this, and you’ll receive your unstaken BALN immediately since the unstaking period has been removed), go to the spiffy new “Rewards” section on the front page, and simply choose how many BALN you want to lock up and for how long. The platform will tell you how many bBALN you will earn, your anticipated rewards and other information before you confirm. That’s it.
Network fee distribution will resume from Nov. 7. If you’ve locked your BALN before then, you’ll get a cut of the network fees from the previous week based on how much bBALN you hold.
Finally, live voting on network proposals will resume sometime in the month of November.