- Leading DeFi platforms have supported Balancer’s proposal to boost liquidity on decentralized exchanges by balancing voting and providing liquidity
- Known as the 8020 Initiative, it seeks to allow DeFi users to engage in governance matters without affecting their funds on a liquidity pool
- Top DeFi protocols that have embraced the plan include Paraswap and Radiant Capital
Leading DeFi platforms have supported Balancer’s proposal to boost liquidity on decentralized exchanges (DEXs) by balancing voting and providing liquidity. Known as the 8020 Initiative, it seeks to allow DeFi users to engage in governance matters without temporarily halting the usage of their funds on liquidity pools. Some top DeFi protocols that have expressed support for the proposal include Paraswap and Radiant Capital.
Single-Asset Staking Encourages Price Slippage
Aave is among the first platforms to practically embrace the plan having voted to implement “into [its] safety module” in 2021. According to Balancer, “8020 refers to a two-asset pool with 80% of one asset and 20% of another.
We proudly present that ParaSwap has joined the #8020Initiative
The 80/20 technology enables $PSP liquidity providers on the @Balancer pool to reduce impermanent loss while efficiently providing liquidity.
Stay tuned! More coming soon 👀 pic.twitter.com/UCBLtqVkP0
— ParaSwap (@paraswap) July 6, 2023
In a recent post explaining the proposal, Balancer observed that the current staking model used by DEXs encourages price slippage. The current model, known as single-asset staking, requires platform users to stake the platform’s native token to gain voting powers, a process that temporarily removes liquidity on a decentralized exchange.
Balancer proposes the implementation of a dual-asset staking model that allows users to vote without staking the platform’s native token, something that will help stabilize DEXs’trading liquidity.
“For the first time in governance history, as the sum of staked tokens grows, the available trading liquidity increases rather than decreases.”
Balancer is ushering in the next stage of streamlined governance technology!
Welcome to The 8020 Initiative.https://t.co/dF1Nfssi0I
— Balancer (@Balancer) July 6, 2023
More Liquidity, a Smoother User Experience
The DeFi platform believes that increased liquidity will allow DEXs to handle larger trades and curb extensive price volatility, which translates to a smoother user experience.
The move by protocols to embrace Balancer’s proposal comes two months after Robinhood launched a DeFi connection tool to ease the movement of funds between the online brokerage and DeFi protocols.
With a dual-asset staking model, the trading liquidity on decentralized exchanges is bound to increase, enabling them to compete with their centralized counterparts.
