Balancer, a decentralized finance (DeFi) protocol, has proposed the 80/20 Initiative to increase liquidity and reduce price slippage in the DeFi space. The initiative seeks to replace the single-asset staking model with a two-token version, comprising a governance token and a chain’s base token or a liquid stablecoin. According to Balancer, this structure will allow holders to participate in protocol governance while also providing liquidity on decentralized exchanges.
Radiant Capital, Alchemix, Paraswap, Y2K Finance, and Oath Finance have all joined the 80/20 Initiative, joining Aave which elected to implement the initiative in 2021. Balancer said in a Medium post that the current single asset staking model incentivizes mercenary capital and increases token volatility and slippage. The two-token model will allow holders to stake Balancer Pool Tokens (BPTs) and 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.
The current single asset staking model is outdated, said Balancer. It incentivizes mercenary capital and increases token volatility and slippage.