Decentralized finance (DeFi) project Balancer Labs officially announced the launch of its native governance token BAL on the Ethereum mainnet, with the price of BAL tokens increasing significantly following the launch.
The news of the BAL governance token launch was made by CEO and Co-founder of Balancer Labs, Fernando Martinelli, via a Medium blog post on Tuesday (June 23, 2020). According to the announcement, the team is employing an “on-chain governance system,” which allows the token holders to vote on decisions regarding the project.
Balancer is an automated market maker (AMM) exchange protocol built on the Ethereum network, which algorithmically makes adjustments to prices and liquidity. Users can create liquidity pools where tokens can automatically rebalance after a token price change occurs in a pool.
The decentralized exchange began the distribution of BAL tokens to liquidity providers via liquidity mining on June 1, 2020, as a build-up to yesterday’s launch. Also, the platform announced that close to 1,000 ETH addresses currently receive BAL tokens, with a total of 35,435,000 BAL minted as of June 23.
Furthermore, since the distribution, which started three weeks ago, the platform allotted a total of 435,000 BAL tokens, with 145,000 BAL given out weekly to liquidity providers. According to the token distribution formula, 25 million will go to investors, the Balancer team, and advisors. On the other hand, 5 million each will go to ecosystem and fundraising fund, with token holders deciding how funds for the former will be utilized in the future.
Following the launch, the price of BAL tokens almost quadrupled, from $6.65 to $22.28. Data from DeFi Pulse shows the decentralized exchange (DEX) at the number seven spot. With over $50M in total value locked (TVL), Balancer is the current number one DEX platform.
The BAL governance token launch comes amid the backdrop of the hype surrounding liquidity mining. This distribution mechanism incentivizes investors by rewarding them in tokens when such investors contribute digital assets to a project.
Another DeFi project, Compound, earlier launched its COMP governance tokens, which saw its price surge significantly. Currently, Compound is the largest DeFi project based on TVL with market dominance of almost 38%. However, Compound’s astronomical growth has caused experts to worry about the long-term sustainability of the lending platform.
While there seems to be so much excitement surrounding DeFi at the moment, some pundits are calling for caution. Recently, Waves Founder and CEO, Sasha Ivanov, warned against letting DeFi become the new crypto bubble. According to Ivanov, the current DeFi model looks like the crypto counterpart of the mainstream financial system, which could have the usual trend such as hacks, bubbles, scams, etc.