Dubbed the 8020 Initiative, the proposal aims to address the lack of liquidity in DeFi by creating a two-asset pool comprising a governance token and a chain's base token or a liquid stablecoin. According to Balancer, such a structure will allow holders to participate in protocol governance while also providing liquidity on decentralized exchanges.
In a Medium post, Balancer said the current "single asset staking model is outdated," adding that it "incentivizes mercenary capital" and "increases token volatility and slippage." Slippage refers to the difference between a trade’s expected price and the price at which the trade is executed.
In order to participate in protocol governance at the moment, token holders must stake the protocol's native token, which reduces the circulating supply and capital on decentralized exchanges. Under the new model, holders can stake Balancer Pool Tokens (BPTs), allowing them to take part in governance proposals while the underlying protocol's token remains in the pool to provide liquidity to swaps.
This means that as the number of staked tokens grow, so will the available trading liquidity.
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