As Balance moves to the next phase of our journey, we are pleased to introduce our new tokenomics model allowing for enhanced community engagement with our products and in so doing, provide utility for the BLNC token. The token will also act as the governance token of the Balance DAO.
Balance token holders will hold governance rights and receive airdrops that they can claim based on the profits the protocol generates through its products and partnerships. For token holders to have voting rights and to receive airdrops, their balance tokens will need to be locked. When locked, the holder will receive vested tokens that will accumulate over time during the locking phase. While locked, holders will be able to wrap their vested tokens into a non-fungible token (“NFT”) which in essence allows for the vested tokens to be transferable. In this manner, users will be able to trade their tokens on any NFT marketplace.
The idea behind the vested token is to allow for a mechanism that will reward existing holders and early adopters but also not de-incentivise future holders. Accumulated vested tokens will be burnt once the holder decides to unlock, thus forfeiting their voting rights and airdrops when doing so. This allows for voting rights and airdrops distribution of the leaving holder to be re-allocated to the remaining locked holders.
In short, the BLNC Token will feature similarities to the vote-escrow model adopted by many other DeFi protocols. The addition of the NFT-based wrapping of vested tokens facilitates transferability of these tokens.
Balance will have a fixed supply which will depend solely upon the number of FHM token holders who swap their FHM tokens for BLNC. As an incentive to swap their tokens, FHM holders will receive a 5% boost during the initial swap period.
The circulating supply of FHM is ∼2.95m. If all FHM token holders swap for BLNC during the initial swap period, the circulating supply of BLNC will be ∼3.1m tokens if all holders transition. BLNC does not inflate and no new BLNC will be minted beyond this point.
The non-circulating supply of FHM will be converted 1:1 to BLNC tokens and adjusted in the following manner:
The total supply, excluding any supply created through new fundraising activities can be summarized as follows:
As can be seen by the charts below, the current non-circulating supply will be introduced back into the DAO account over the vested period of time. As in the past, the DAO will remain very cautious when increasing the token supply.
The new Balance token will remain on the Fantom network and the existing FHM/DAI liquidity pool on SpookySwap will be converted to a BLNC/DAI liquidity pool. At this point the FHM/DAI pair will be retired and no longer available. We will make an announcement closer to the time to inform the community of the exact date when the liquidity pool will be converted.
Vote Escrow Balance tokens (veBLNC) can only be acquired by locking Balance tokens in 3 monthly cycles (i.e. quarterly) with no unlock functionality available. Once the quarterly lock comes to an end, users will be able to relock or unlock their tokens. Users that choose to relock will continue to accumulate veBLNC tokens and thus maintain their portion of airdrop claims and also maintain their share of the governance rights. If a user decides to unlock a portion of their balance tokens, an equal percentage of their veBLNC tokens will be burnt.
While locked, users will be able to wrap their veBLNC into an NFT, in this way veBLNC tokens are transferable. Using this wrapped NFT, users will be able to sell their veBLNC tokens on any NFT marketplace.
For a period of two years, veBLNC will have a locking reward mechanism whereby token holders will receive an APY increase in veBLNC supply that will be adjusted every six months. This will incentivise existing holders and early adopters to remain participants in the protocol as they will receive benefits, but still leave sufficient opportunity for new holders to enjoy the rewards and benefits too.
Below is the following APY structure for the veBLNC over a period of two years:
As can be seen by the graph above the total increase in veBLNC for the user continually relocking over the full two year period does not appear to be significant, however it does give the long-term initial holder a reward mechanism that allows for a larger portion of the airdrop claims and governance votes. This aims to not discourage newcomers to the protocol at a later stage as it does not completely diminish their late entry portion of the airdrop claims and governance votes. Thus striking a good balance between new and old BLNC token holders later on.
It is important to point out that these added veBLNC tokens will diminish over time as investors unlock their BLNC tokens due to the same percentage veBLNC burn. Thus as more seasoned token holders decide to exit the protocol so will their added benefits. The main benefit to the veBLNC model is that the token supply of BLNC remains unaffected and thus does not cause an increase in the token supply of BLNC, thus offering better price stability to the BLNC token. While at the same time ensuring that community members that are vested in the long-term health of the protocol receive the benefit.
The other added benefit to the vote escrow model in this structure is that it limits yield mercenaries. While the locking mechanism in itself does achieve that, new users entering and exiting quarterly will not receive the added initial veBLNC APY benefit.
Holders of the BLNC/DAI liquidity pool (“LP”) token will be able to lock their BLNC/DAI LP tokens and in turn, receive veBLNC rewards. These locked BLNC/DAI tokens will receive veBLNC rewards and will be subject to the same compounding effects of the veBLNC accumulated amounts at each reward period. Similarly to the BLNC locked tokens, if the LP tokens are unlocked then the veBLNC tokens will be burnt and no further rewards associated with the veBLNC will be given.
This will incentivise users to contribute towards providing liquidity by receiving rewards that do not affect the supply of BLNC and give the protocol the required price stability. Additionally liquidity pool providers that have locked their LP tokens will receive a NFT as a receipt that will act as a reference to their holdings.
Only veBLNC token holders will be eligible for airdrop claims. Users that have locked their BLNC tokens will be eligible for their portion of the airdrops as per their percentage veBLNC holdings relative to the veBLNC index. Airdrops will be done on the 10th of every month once a revenue distribution calculation has been completed for the prior month.
Users will be able to claim their airdrops on the lock page of the new Balance Dapp by using the claim button. Users will be entitled to these airdrop claims regardless of whether or not they have wrapped their veBLNC into an NFT or not.
Balance will implement a distribution model based on the profits generated by the protocol, whereby veBLNC holders will receive a portion of the profits each month. Profits will also be used to do buyback and burns of the token at unannounced intervals and unknown price points. These will remain unknown to prevent unwanted price action but will be reported on after the fact in the quarterly reports.
Below is a table summarizing the profit distributions to illustrate different percentage allocations at different revenue intervals at different reserve ratios. Each distribution will be discussed in the quarterly financial reporting to provide clarity on that quarter’s actual values.
Reserves are broken up into 3 different tiers:
Profit distribution to holders will be significantly higher if reserves are met by the protocol to cover expenses. The reserve mechanism is in place to see the protocol through another crypto winter, whereby costs are covered to make sure that the revenue generating products are able to continue or to fund the development of new products should there be a change in market sentiment. Thus requiring the team to pivot and possibly build new products from the ground up. We will therefore only start allocating a portion of profits to holders once the Insufficient Reserves threshold has been met. During a period of Low Reserves, the profit allocation between increasing reserves and dividends/buybacks changes based upon a sliding scale. Allocating a greater percentage of profits to dividends/buybacks as the value of reserves gets closer to the Adequate Reserves threshold.
An overview of our expenses will be communicated on a quarterly basis. As we grow we anticipate that additional costs will be incurred to support and fund this growth. The quarterly reports will explain the rationale for these expenses and how we anticipate that incurring these expenses will generate future revenue and returns for holders.
Balance Pass holders will receive a boost to their veBLNC holdings after performing a soft stake of their Balance Pass on the Dapp.
This boost will only be available after 12 months when the veBLNC APY drops to 12.5%. This is to prevent excessive dilution of veBLNC in the first 12 months when the APY is higher. The boost will vary depending on the Balance Pass category, as shown below and will be applied to the veBLNC APY at the time of soft staking:
To illustrate the above, if a Platinum Balance Pass holder soft stakes their pass during the 10% veBLNC APY period they will receive 11% veBLNC APY, instead of 10% veBLNC APY during that period. This is a 10% increase of the veBLNC APY.
BLNC is the new vote-escrow based token of the Balance DAO. Balance will have a fixed supply, with no bonding or staking mechanisms available. When locked, Balance tokens will accumulate Vote-Escrowed Balance tokens, with monthly airdrops being made in proportion to holder’s vote-escrowed tokens. The vote-escrow lock is for 3 months at a time with no unlock functionality available.
At the end of each cycle, holders will be able to relock their Balance tokens to continue accumulating the Vote-Escrowed Balance tokens. If a holder chooses to unlock their Balance tokens, they will burn their Vote-Escrowed Balance tokens in proportion to the percentage of their Balance tokens that they unlocked.
Airdrops will be based upon the profits generated by the protocol. Balance Pass holders will receive a boost to the vote-escrow APY yield after 12 months from the launch of the Balance token.