Massive leveraged tokens causing chaos? Balancer urgently establishes a "token whitelist" in an attempt to limit large holders from participating in mining.

Uniswap's competitor Balancer officially launched its liquidity mining mechanism on the evening of the 23rd, distributing governance token BAL to liquidity providers. According to reports yesterday, BAL token saw a surge of up to 145.7% within the day. Following the issuance of governance tokens by Compound protocol, it attracted a lot of speculative activities. In response, Balancer urgently changed its system and established a "token whitelist" that meets the standards.

Leveraged Tokens Enter the Fray

The data platform predictions.exchange first pointed out on Twitter that FTX exchange is leading this liquidity mining game. It can be seen in the chart that the leveraged tokens "USDTBEAR" and "USDTHEDGE" issued by FTX dominate the liquidity providers. According to rough estimates by the calculator, over 50% of BAL tokens this week will be owned by this liquidity provider (releasing at a rate of around 145,000 tokens per week, approximately 7.5 million tokens per year).

Due to Balancer using price data provided by Coingecko as the basis for evaluating liquidity in the pools, this allows whales and large institutions to exploit loopholes by simply depositing large amounts of ERC20 assets in the Balancer liquidity pool to receive a large amount of BAL tokens.

Suggestions from FTX Founder

It is unclear whether it was the issuer FTX exchange platform behind the leveraged tokens, but its founder Sam Bankman-Fried did offer a series of suggestions to Balancer Labs on Twitter, summarized as follows:

• Some trading pairs in the pool have extremely low trading volumes but can still obtain BAL tokens
• The BAL token distribution rules should be redefined
• Establish tokens that meet standards
• Voting is not done through BAL tokens, undermining BAL governance
• Initiate token whitelisting, and distributed tokens should not retroactively affect
• Leaders need to respond quickly both in actions and to community feedback

Sam Bankman-Fried believes that any real-time changes are very risky for DeFi projects themselves. He emphasizes that modifications to what users have already received should not be made lightly; otherwise, governance loses its importance. He stated:

Honestly, liquidity mining is stupid. It effectively creates "negative fees," seemingly driving signs of increased activity, but what the public needs are useful products.

Balancer Implements Token Whitelisting

Due to obvious exploitation in liquidity mining, Balancer Labs swiftly made changes and initiated a community vote on the Discord platform. The conclusion was to "implement qualified token whitelisting" to restrict large institutions from acquiring a large amount of BAL tokens. Previously distributed BAL tokens are not subject to this limitation, and the token whitelist has been officially implemented after block height 10331138.

BAL token has experienced extreme volatility, with its seed round price at $0.6 and currently reaching up to 23, falling back to $17.7 at the time of writing. According to Coingecko's rankings, BAL currently ranks 73rd in market capitalization, and Balancer Protocol's locked value has experienced a twofold increase, currently ranking fifth among DeFi protocols with $85 million locked.

Although the FTX founder claims that liquidity mining is very foolish, they still announced today the launch of BAL tokens for spot, quarterly, and perpetual contracts, offering leverage levels of 3, 5, 10, and 20.