Economic enshrinement with the ICON blockchain

In the lead-up to Balanced’s cross-chain debut, it became clear that the success of Balanced and the ICON Network are more intertwined than ever. ICON needs Balanced to demonstrate the power of xCall, and Balanced needs ICON to provide meaningful liquidity to support traders as it expands cross-chain.

This culminated in a proposal to align Balanced and ICON under a single vision: make Balanced a leading cross-chain DeFi protocol.

The way they proposed to do that was through economic enshrinement, a strategy that uses network-layer inflation to incentivise behaviour within an application, and in return the application uses 50% of its revenue to buy and burn the network token.

Learn more about economic enshrinement, the terms of the agreement, and why it matters.

About the economic enshrinement proposal

The economic enshrinement discussion was initiated by contributor Benny Options, who believed ICON and Balanced would be more successful if they joined forces to achieve a shared outcome.

The initial proposal suggested a full buyout of BALN at a price of 0.5 ICX each, and a transition to a one-token model (ICX). However, it became clear that while this route would be the optimal solution for a new project, the Balanced community would not give up their BALN without forcing ICON to pay a much higher price. (At the time, 1 BALN was worth 0.35 ICX. It’s now worth 0.75 ICX.)

After much discussion between stakeholders, ICON and Balanced approved a counterproposal that maintains the two-token model, but splits Balanced revenue down the middle: 50% will be governed by bBALN holders, while the other 50% will buy and burn ICX.

Here’s how Balanced benefits:

• Network-owned liquidity: Approved pools will receive liquidity from ICX emissions, which will deepen liquidity and increase revenue.
• Balanced Savings Rate: ICX emissions will incentivise bnUSD deposits, which will increase demand for bnUSD and revenue for Balanced.
• Insurance Fund: ICX emissions will be set aside for use in the event of an exploit.
• Ongoing support: The ICON Foundation may also use their own resources to support growth and development.

Why enshrinement was necessary

Balanced is the flagship app of the ICON ecosystem. It demonstrates what’s possible with ICON’s cross-chain technology, and creates value for both projects. But to ensure Balanced’s future success, the economic enshrinement agreement was critical.

After facing losses from an exploit and the Prime Trust bankruptcy (which nullified the value of USDS), it would have been difficult for Balanced to bounce back, fund ongoing development, and build deep liquidity on the exchange without additional support.

By aligning with ICON, Balanced now has a clear pathway to millions in protocol-owned liquidity, perpetual revenue from liquidity supplied by the ICON Foundation, and ongoing emissions from the ICON Network to bolster liquidity and incentives.

Now we’re all working in the same direction: to make Balanced a leading cross-chain DeFi protocol.

What happens now

All changes and negotiations required for the enshrinement are complete.

Balanced uses 50% of its revenue to buy and burn ICX, which you’ll soon be able to view from the Stats page. The ICON community has approved the ICX emission changes, and the proposal to allocate ICX emissions to Balanced was approved via governance on February 26.

Balanced also sent all BALN in the DAO Fund to the ICON Foundation in return for sICX, which gives the DAO enough liquidity to fund ongoing development and invest in revenue-generating activities.

Now that Balanced has funding and ongoing incentives to bolster liquidity, the contributors can work at a more consistent pace to support additional blockchains. They also plan to explore additional DeFi functionality, like Uniswap V3-style liquidity pools, leverage, and crypto lending.

The core contributors began work on Balanced just over 4 years ago, and most of them haven’t stopped since. During the first two weeks post-launch, Balanced achieved milestones such as:

• 10 million bnUSD minted within 50 hours
• $500,000 earned from fees within 10 days
• $200 million locked within 10 days
• 25 million bnUSD minted within 12 days
• 10% of the ICX circulating supply collateralised within 16 days

With the powers of Balanced and ICON combined, we’re excited to see what milestones we can achieve together. Join us on Discord to participate in Balanced’s journey to become a leading cross-chain DeFi protocol.