Hi All,
I have revised the proposal to reflect the amendments discussed above, the following is to be submitted on Snapshot for voting.
The additional 100,000 BAL acquisition will be presented in a separate forum post and voted on separately to this proposal.
title: ARC - Strategic Investment BAL Token
status: WIP
author: Llama Community - @MatthewGraham
created: 21-03-2022
Simple Summary
Acquire 200,000 BAL tokens via a combination of performing a BAL for AAVE token swap. The BAL tokens are to be complemented with ETH and deposited into the 80/20 BAL/ETH pool. The BPT token is deposited into the veBAL contract and locked for 1 year. The veBAL holding is then used to direct incentives to new aToken Boosted Pools, [1].
Abstract
Perform a token swap with Balancer by exchanging AAVE from the Ecosystem Reserve for 200,000 BAL tokens. The exchange rate to be used is the 90-day moving average price when the votes pass on both sides.
All 200,000 BAL tokens plus the aBAL tokens in the Reserve Factor (redeemed for BAL) are to be paired with sufficient ETH and deposited into the Balancer V2 BAL:ETH (80:20) pool. The veBAL holding will then participate in Balancer’s revised tokenomics that commenced on the 28th March.
Initially, the veBAL will be used to vote BAL rewards to pools which support aTokens that create TVL for Aave and/or AAVE liquidity pools.
Motivation
Aave and Balance have a long history of working together. The AAVE : ETH (80/20) Balancer V1 pool BPT is accepted within the Aave Safe Module and the newly created Balancer Boosted Pools drive TVL to Aave markets, [2].
When the AAVE : ETH (80/20) Balancer V1 pool is moved to Balancer V2 and integrated into Aave’s Safety Module, the veBAL tokens can be used to vote BAL rewards to the newly created AAVE : ETH (80/20) Balancer V2 pool.
In addition, the veBAL can be used to vote BAL rewards to Balancer Boosted Pools which utilise Aave markets in the background to create yield for passively held liquidity, [3]. There are likely to be many more Balancer Boosted Pools that utilise aTokens in the future and the veBAL votes can be used to help bootstrap these pools by directing BAL rewards to those pools. Using veBAL to vote for BAL rewards to pools that strengthen Aave is a strategic advantage of deploying the BAL tokens into the BAL:ETH pool.
By exchanging AAVE for BAL, the tokenswap reflects the ongoing collaboration and shared vision through governance in each other’s community. The token exchange, plus additional acquisition, is significant enough for Aave to become just outside of the Top 50 BAL tokens holder, based on etherscan BAL holder rankings, [4]. Balancer will become a Top 80 AAVE holder, [5]. Each community will have influence in the other’s governance process, enabling them to best represent their interests and to collaborate.
Aave will likely be one of the first movers in the upcoming BAL wars and will gain a strategic advantage to bootstrap new Balancer Boosted Pools which lead to tokens being deposited in Aave markets to earn yield. This has the benefit of creating TVL and Revenue for Aave.
The initial sizing to acquire 200,000 BAL was something that was reached via discussions with the Balancer community and happens to be the same size as the recent Tribe DAO and Balancer token swap, [6].
The initial sizing was also determined by the ability to influence how the BAL emissions are to be distributed. If all BPT from the BAL : ETH pool are converted to veBAL, Aave will receive 3.3% of the 14,500 BAL emission schedule which is equivalent to 478 BAL weekly, or $8,126/week at $17/BAL or $422,552/year. If 100% of the current BPT were deposited into the veBAL contract, the yield is very close to 10%. Other deployments from the Reserve Factor will also earn BAL rewards over time, [7].
With 3.3% of veBAL supply, Aave will determine where 2,680 of the 81,200 BAL tokens are to be distributed each week via the Ethereum mainnet pool gauge. This is equivalent to 5% APR on a $47.40M pool without any compounding or other yield sources like swap fees or yield from Aave markets. This is sufficient to support bootstrapping new liquidity pools that support growing TVL for the Aave community. Given the size of the Aave community investment in the Balancer community, it is reasonable to think that Liquidity Mining Committee may also be voting to allocate a portion of there 14,500 weekly BAL emission to support Balancer Boosted Pools which drive TVL to Aave markets.
Implementation
The token swap is to be performed by both Balancer and Aave by depositing tokens into a contract like how Tribe DAO swapped TRIBE for INDEX, [8].
The aBAL holding in the Reserve Factor, 1,890 aBAL at the time of writing which will be redeemed for BAL and deployed along with the 200,000 BAL tokens attained via the proposed swap, [9].
Once the BAL has been received it will be transferred to the Reserve Factor from there the BAL and matching amount of ETH will be deployed into the BAL : ETH pool on Balancer V2. The BPT token is deposited into the veBAL contract and locked for 1 year.
The veBAL holding is then used to direct incentives to new aToken Boosted Pools
References:
[1] Introducing veBAL tokenomics - Proposals - Balancer
[2] Pool management - Balancer
[3] Balancer
[4] $17.88 | Balancer (BAL) Token Tracker | Etherscan
[5] $186.72 | Aave Token (AAVE) Token Tracker | Etherscan
[6] FIP 33: Swap between Balancer DAO and Fei DAO - Proposals - Tribe
[7] ARC - Consolidate Aave V1, V2 & AMM Reserve Factors, Purchase CVX and Deploy to Earn Yield
[8] https://github.com/fei-protocol/fei-protocol-core/blob/develop/contracts/utils/OtcEscrow.sol
[9] Aave: Aave Collector V2 | Address 0x464c71f6c2f760dda6093dcb91c24c39e5d6e18c | Etherscan
Copyright
Copyright and related rights waived via CC0.