Governable Protocol Fees

Overview

Governable Protocol Fees are fees collected by the Balancer Protocol, not Liquidity Providers. There are a few ways in which the fees can be collected, and far more in which they can be used. Though many Liquidity Providers may also be Balancer Governors, we will discuss them here as distinct groups for clarity.

Sources

Trade Fees

The obvious source of Protocol Fees is from trading. Balancer traders already pay trade fees to Liquidity Providers in exchange for making their swap possible. Fees are denominated in the Input Token when executing a trade.

The Protocol Fees for trades will be collected as a percentage of the trade fees already being collected (a fraction of a fraction). From the traders' perspective, there will be no price increase.

Upon launch, Balancer V2's Protocol Fees for trades are turned off by default. They can be turned on only by a vote of the Balancer Governors (BAL token holders). The governors will have the power to activate, and determine the amount of, these fees.

Flash Loan Fees

Another source of Protocol Fees is from interest on Flash Loans. For the sake of preventing Flash Loan abuse, Protocol Fees for Flash Loans will be turned on by default. Further reading for Flash Loans on Balancer:

Uses

Protocol Fees are to be used according to proposals and votes by the Balancer Governors. There are endless possibilities for what the Balancer Protocol could do with these fees, some of which may not even exist yet. This list of example uses is not meant to be recommendations for what to do with them, but is instead meant to start the conversation on how to use this incredible power.

We invite you to join our Discord and Forums to take part in the discussion over how to use these fees.

Possible uses of Balancer Protocol Fees

  • Put them into a Balancer Pool

  • Fund Gitcoin Grants for protocol improvements

  • Fund advertising campaigns

  • Fund grants to attract strategic partnerships

  • Buy a decentralized insurance policy

  • Lend them on an external protocol

  • Pay them directly to Balancer Governors