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Balancer has launched distributions of the BAL governance token on the Ethereum mainnet. The token has more than tripled in value in just a few hours. Balancer and Compound are now DeFi’s most valuable protocols.
Balancer Labs, the developer of an automatic portfolio management tool, confirmed rumors of beginning distribution of its BAL token. After the enduring craze that was happening last week regarding the debut of Compound’s COMP token, BAL gets to be the second governance token earned by decentralized finance (DeFi) app’s most appreciated clients.
Since June 1, all investors in Balancer token pools have been earning BAL, but those tokens still haven’t been assigned. At the time of writing, Balancer’s total value locked (TVL) has gone from $15.9 million on May 31 to $43.6 million. Balancer Labs CEO Fernando Martinelli said that, from now on, earnings will be minted and distributed on a weekly basis.
“By far the most important factor or reason why we are doing that is because we want this thing to be decentralized. We believe in a decentralized, trustless future, and we want Balancer to do that. We need the distribution to be in a healthy way.”
Assigning governance tokens for investing in the protocol is known as “liquidity mining”. This way of management, which develops to even giving users a seat at the table when deciding how to run decentralized applications, has been discussed throughout 2020. In April, IDEO CoLab Ventures, a venture capital fund backed by the design firm IDEO, talked about it in their blog post about translating participation into equity.
However, it all got real when collateralized lending startup Compound became the first major DeFi app to distribute some of its governance tokens. Both investors and borrowers started earning COMP on June 15. Since then, Compound became the biggest app in DeFi, with its available liquidity rising by 6x.
New Trends Are Coming
Let’s not forget that BAL recently showed up in Ethereum wallets all over the world. That is important because the two projects are going through very different momentum in their life cycles. This combo was first announced back in September 2018 and was running for well over a year before the token was even released. At the first expenditure of COMP, Compound users had already committed nearly $100 million in crypto collateral.
In the meantime, Balancer only went live this spring and has around $40 million locked into it. If Balancer could advance by the same proportion as Compound, it could jump from the sixth position in DeFi to the third. However, it is obvious that no one still knows what might happen.
BAL Tokens to Be Minted from Scratch
Martinelli also stated that the smart contract governing BAL provides for 100 million tokens with no inflation, but “those 100 million won’t be minted from the beginning.”
For now, 35 million have been minted. From those, 25 million are designated for the team, advisers and investors, and 75% of that bestows gradually over three years, and unvested tokens can’t trade or vote.
According to Martinelli, the team has control of 5 million tokens for an ecosystem fund, in order to promote growth in various ways and 5 million tokens for future fundraising rounds. Balancer is currently a team of four and it expects to grow to a team of 10 by the end of the year. The main goal is to decentralize the platform.
The rest of 65 million tokens mint at a rate of 145,000 BAL per week, which means it would take about nine years for them to be completely distributed, but because BAL is a governance token the holders could always vote to speed up distribution.
Less than twelve hours after Balancer announced its protocol governance token BAL was live on the Ethereum mainnet, and the price jumped from $6.65 to $22.28. At the time of writing the price was $18.44.