Eridani steps up for Dynamic Fee Research!
The team at Balancer Grants SP is excited to announce our latest grantee is the Eridani team to tackle research methods for adjusting dynamic fees to combat LVR in Balancer pools. The grant will conduct research on optimal dynamic AMM fee algorithms for different Balancer pools, simulating and analyzing different dynamic fee algorithm alternatives. The ultimate goal is to have a number of tested algorithms that can be implemented into custom Balancer pools or other mechanisms made possible by V3 that could be used to redistribute LVR to LPs.
The grant will cover, at least, the following variables as inputs for a fee function:
- DEX Volatility
- Location in a block (first access auction etc.)
- Time since the last pool interaction
- Gas price
- CEX price
- CEX intrablock volatility
- CEX trading volume
In addition to considering different variables, the grant will also explore various potential update frequencies for these variables and assess whether different pools and chains require different suitable dynamic fee functions.
How does the grant aim to provide value to the Balancer Ecosystem?
The grant will deliver results in a form of blog or forum post as well as fee algorithm backtesting results and code that the community can use to aid protocol development.
If the grant is successful, dynamic fee pools would have a higher APR than equivalent pools with static fees. As a result, dynamic fee pools should have a higher TVL than static pools, leading to lower slippage, which should increase trading volume compared to a static fee pool with higher slippage.
The deliverables of this grant include tested algorithms that can be implemented by teams as hooks or custom pools.
“This has been a long standing RFP and the Eridani team is the first to propose a suitable academic approach that we are comfortable awarding this research to. LVR is one of the next big hurdles to be solved in DeFi and we want to contribute to solutions for the industry. If this research produces high quality outcomes, it has the potential to be extended.”
— Burns, Balancer Grants Committee
“We are excited to receive a Balancer grant to research variable fee pools as variable fees play a key role in mitigating LVR. LVR is one of the biggest challenges in DeFi causing centralization of Ethereum’s block building market.”
— Antero Eloranta, DeFi researcher
About Eridani
We are a group of independent crypto researchers conducting research on blockchain fundamentals and DeFi.
About Balancer Grants
The BAL Grant program is one way Balancer DAO promotes the development of the Balancer Protocol and Ecosystem.
The BAL Grant program provides support and funding ($1K — $100K) to projects committed to supporting Balancer Protocol in achieving its mission to become the number one source for Decentralized exchange trades. This program is a good fit for individuals and groups that want to run a project that builds technology or resources on the Balancer Protocol.
Apply now!
If you are interested in supporting the development of the Balancer Ecosystem or want to build on top of the Balancer Protocol, this is your chance! Get started by filling in the Grants Application form. You can also check out our RFP page for inspiration!
For further questions about how the Grants Program works, check out the grants page, follow us on Twitter, or send an email to grants@balancer.community.
