Balance Token economics
Balance Tokens represent ownership in the Balanced DAO. When locked, they're entitled to governance and network fees, and are mined by providing liquidity on the Balanced exchange and/or borrowing bnUSD.
There will be no pre-mine of Balance Tokens, and there is no maximum supply. 100,000 tokens will be mined per day for the first 60 days of operation. On the 61st day, the amount mined per day will begin to decrease by .50% each day until reaching 1,250 tokens per day to perpetuity. This results in a sub 2% inflation rate and continued incentivisation to use Balanced.
- 47% to liquidity providers
- 12.5% to borrowers
- 20% to Balanced worker tokens
- 20% to the DAO fund
- 0.5% to the emergency reserve fund
Balanced worker tokens (BALW) provide continued incentives to develop the platform and are explained in more detail in the Governance section. The DAO fund will hold BALN tokens, which BALN stakers can vote on how to spend (i.e. promotions, development, airdrops, bug bounties, security audits, fundraising, etc.).
To mine BALN through borrowing, you must meet the following qualifications:
- Deposit collateral into Balanced
- Borrow bnUSD from Balanced
After meeting the above qualifications, the formula to calculate an individual’s mining rewards on any given day is a function of the amount of debt they have in Balanced relative to the total debt. Here is the precise formula:
Mining rewards = (your debt / total debt on Balanced) x BALN allocation to borrowers
The Balanced DEX is an automated market maker, a style of decentralised exchange made popular by Uniswap. To qualify for liquidity mining rewards, users must provide liquidity into the incentivised liquidity pools on the Balanced exchange, as detailed in the Distribution of Balance Tokens section. The liquidity provided by users is utilised to have an offer price available on both sides of the trading pair.
For example, liquidity provided to the sICX/bnUSD pair is used to buy and sell both sICX and bnUSD as trades are executed against the pool. The price offered by the pool is based on the ratio of assets within the pool. This is different from traditional order books, where traders place a specific limit order at a specific price.
To calculate the amount of mining rewards earned by a liquidity provider:
Liquidity rewards = (your liquidity / total liquidity) x BALN allocation for that pool
In order to receive any of the entitlements associated with holding Balance Tokens, one must first lock up BALN.
These are the fees associated with Balanced. All fees are adjustable via a vote by bBALN holders:
- 0.30% decentralised exchange fee. Charged to users when trading on the Balanced decentralised exchange. Half of this is kept in the liquidity pool that supported the trade, and half is collected by the network.
- 0.75% origination fee. Charged each time a borrower mints Balanced Dollars.
- 50% penalty fee. Charged to users who withdraw their locked BALN early.
Network fee distribution can be adjusted by bBALN holders via governance. At time of writing, fee distributions are as follows:
- 30% to bBALN holders
- 70% to the DAO Fund, which is managed by bBALN holders
bBALN holders also have governance power, which allows them to propose and vote on changes to Balanced.