[ARFC] Treasury Management - GHO Liquidity Strategy Update

Title: [ARFC] Treasury Management - GHO Liquidity Strategy Update
Author: @TokenLogic
Dated: 2023-09-08


This publication details the revised liquidity strategy for GHO across Ethereum DeFi.


This publication outlines the GHO liquidity strategy with two main objectives:

  • Improve GHO peg
  • Promote diversified liquidity across multiple exchanges

It is widely accepted that the GHO peg requires improvement. This was especially evident when GHO traded at beneath 96 cents.

Furthermore, several liquidity pools have come about organically on Maverick, Uniswap and Curve. Similar to the Balancer pools, these pools are mostly GHO which is reflective of the GHO price relative to the stable coin being paired within each pool.

Do note, the existing Balancer pools are not being supported by Aave DAO. These pools are being supported by veBAL and vlAURA holders, mostly from contributors within each community.

The two initial pools being considered are GHO/USDT/USDC and GHO/LUSD until SM integration. This will be presented in a separate forum publication for future discussion. This publication will outline the Primary and Secondary Pools being proposed for GHO:

  • Balancer GHO/USDC/USDT - Primary
  • Balancer GHO/LUSD - Primary
  • Maverick GHO/LUSD Static - Secondary
  • Maverick GHO/LUSD Both - Secondary
  • Uniswap (Bunni) GHO/USDC Wide - Secondary
  • Uniswap (Bunni) GHO/USDC Narrow - Secondary
  • Curve Finance GHO/crvUSD - Secondary

For the purpose of this publication, we shall focus on the non Curve Finance pool. The GHO/crvUSD, and potentially GHO/FRAXBP, will be supported initially by the Aave DAO strategic asset holding once ready. How the DAO is to deploy the recently acquired CRV, is still yet to be determined.

This proposal aims to create a structure of liquidity outside of the SM strategy, including efficient options such as concentrated ranges of liquidity incentivised with and create a 3 months trial budget for vote incentives/rewards.


Maverick is an AMM capable of automating liquidity strategies without requiring maintenance. It enables to maximise capital efficiency by automating the concentration of liquidity as price moves. This built-in feature also helps LPs to eliminate the high gas fees that come from adjusting positions around price themselves.

MAV is the governance token, however the tokenomics aren’t fully revealed yet. It’s known that MAV has a veTokenomics model. MAV emissions didn’t start yet, but it’s possible to incentivize liquidity on Maverick by adding rewards by creating & incentivising a boosted pool for a defined amount of time between 3 to 30 days.

A GHO/LUSD pool with 3 BPS & 0,1% width, with liquidity in the range from 0,9811 to 0,9980 GHO per LUSD has been created and incentivised by Liquity with 1,5k LQTY per 7 days during 3 weeks. Additionally, LUSD liquidity managers proposed to create co-incentives for GHO/LUSD pools by committing up to 5K LQTY/month for the trial duration if this proposal is approved.

Considering that a range can’t be updated by governance, and since the pool was full GHO a few days ago, we’re considering updating the strategy above by creating a wider mode static boosted pool, and creating a pool mode both on top.

Screenshot 2023-09-08 at 16.44.59
Screenshot 2023-09-08 at 16.45.36

As that the full max estimated TVL is unlikely to be deposited at launch & since the unspent budget can’t be clawback (liquidity mining), incentives will start with a lower amount for a small duration (7 days) to easily follow the liquidity growth with the budget. Additional incentives can be added at any time.

Pros of incentivising liquidity on Maverick

  • Automated rebalancing
  • Fully customisable strategy
  • Maximal liquidity efficiency
  • Co-incentives if paired with LUSD
  • Protocol Owned Liquidity can reduce costs

Cons of incentivizing liquidity on Maverick

  • MAV emissions are not live yet
  • Updating a range requires to create a new position
  • Pools contracts are not verified yet
  • Boosted pools incentives are limited to 30 days (can be renewed)

Uniswap v3, Bunni.pro & Liquis

Uniswap V3 allows concentrated liquidity: liquidity allocated within a custom price range. It highly increases liquidity efficiency, leading to more volume, and with the potential of supporting stablecoins peg.

Bunni is a liquidity engine for incentivizing Uniswap v3 liquidity composed of two parts:

  • Protocol that wraps Uniswap liquidity positions into fungible ERC-20 tokens
  • vetokenomics system for incentivizing Bunni liquidity

It enables the creation of gauges receiving emissions while liquidity is in range. However, the liquidity isn’t actively rebalanced and gauges can be killed if the liquidity is out of range.

Liquis is a governance wrapper for Bunni.pro similar to Convex & Aura.

A GHO/USDC pool with 0,05% fees, with the range from 0,9497 to 1,0247 GHO per USDC has been created by community members. Timeless core contributors created an initial smaller range from 0,9757 to 1,0253 GHO per USDC, and submitted the proposal TRC-66 to enable GHO/USDC Gauge with 2% Cap on Bunni, which was approved on July 27th.

Ranges can be updated by governance, and since GHO went below the current price over the past days, we’re considering updating the wide range above, and creating a new narrow one on top.

The Aave DAO does not hold veLIT & oLIT incentives total worth is limited, so to reach the TVL target, this strategy will initially be supported with both veLIT/vlLIQ votes incentives created on Warden Quest, and GHO liquidity mining deposited on Bunni.pro gauges.

Screenshot 2023-09-08 at 16.42.49

Bunni gauges are not live yet, so the Min/Max APR on oLIT emissions will update depending on the actual working supply of each pool. For these estimations, the working supply used is from the current GHO-USDC proportionally to the estimated TVL.

Liquis just launched and will enable a better optimisation but the LIQ token has no price yet, and the first round vote ended on September 6th so it’s not yet included in the tables below but this strategy will most likely be improved in the coming weeks.

Nevertheless, they have a launch partner program ongoing giving access to LIQ tokens vested in exchange of a bribe amount committed over 6 months max, but closing this week as the protocol launched.

The conditions are 0,1% of LIQ supply vested over 4 years for 10,000$ worth of votes incentives for vlLIQ holders (controlling veLIT voting power). While the tokens are vested, the voting power can still be used until the end of the vesting duration, further increasing the yield or enabling recycling part of the bribes spent. More information on the program can be found here.

veLIT bribes were initially considered, so if this proposal is approved, the Aave DAO will be a launch partner by committing an amount of $20k of votes incentives for vlLIQ holders over the next 3 months and will receive 0,2% of the LIQ supply.

Screenshot 2023-09-08 at 16.47.19

These estimations are made at the current time so it excludes LIQ emissions, liqLIT redemption mechanism, DAO vested voting power & impact on the strategy. The tables will be updated in the coming weeks if the overall strategy is approved. The proportion of bribes veLIT vs vs LIQ vs LM might also be optimized during the trial.

Similar to Maverick, as the full max estimated TVL is unlikely to be deposited at launch & because the unspent budget can only be clawback, which represents a limited part of the budget, LM rewards will be added progressively every 7 days to follow the TVL growth.

Pros of incentivizing liquidity on Bunni/Liquis

  • Built on top of Uniswap v3
  • LIT tokenomics are live (oLIT & veBoost)
  • Liquis (Convex-like) recently launched will enable strategy optimisation
  • Launch partner program earning LIQ tokens vested & voting power
  • Updating a range earning rewards can be done by governance
  • Extra liquidity mining rewards can be added on Bunni gauges
  • Protocol Owned liquidity can reduce costs

Cons of incentivizing liquidity on Bunni/Liquis

  • Liquidity is not automatically rebalanced
  • oLIT option token design is complex for users (liqLIT improves this)
  • BPT 80/20 design & oLIT redemption create selling pressure on LIT token
  • Reward are split between emissions from bribes + LM
  • Bunni gauges can be killed if out of range (Process)

Balancer & Aura:

As mentioned earlier, the existing Balancer pools are not being supported by Aave DAO yet and votes on GHO gauges depend on veBAL and vlAURA holders, mostly from contributors within each community. Moreover, GHO/USDC/USDT & GHO/LUSD are expected to be included in the SM at a later stage, but might need to create a base liquidity supported by the DAO before external votes fades away.

Both pools currently have classic gauges eligible for BAL rewards. According to recent changes from AIP-42, the budget allocated will be used to create vlAURA votes incentives on Warden Quest.

The initial strategy proposed is 400k vlAURA votes bribed to sustain 5% APR on a $5M TVL for each pool. The APR could be increased later on by using Aave voting power and blacklisting the DAO from the created Quests to attract more voters for the same cost.

Screenshot 2023-09-08 at 16.49.19

However, spending incentives on stableswap liquidity could be counter-effective before GHO peg is restored, so incentives might start after concentrated liquidity ones, and if the external support left.

Similar to Maverick & Bunni, since the full max estimated TVL is unlikely to be deposited at launch, incentives will be deposited progressively to follow the liquidity growth. Nevertheless, 100% of the budget is spent in bribes so the unspent budget can be clawback on Warden Quest, enabling Aave DAO to pay a fixed price per vote for an important amount without overspending if the votes target isn’t reached.

As always, happy to fix potential mistakes in the strategies estimations if any.

Reward Budget Overview

Maverick & Uniswap v3, Bunni & Liquis (Concentrated Liquidity)


The budget breakdown below contains two different margins:

  • Assume that all strategies will begin to be incentivized at the same time, and with the maximum amount. It’s not what will happen but enables flexibility for the committee
  • Assume that the bribe cost might increase and/or that more liquidity is needed on the different layers, so while the goal is not to spend it, a 20% buffer has been added to the committee budget (buffer not included in the above table)


Any unspent budget will be either deduced from the next budget request if the committee is renewed, or sent back to the Aave DAO treasury.


The following outlines how the this proposal is to be implemented:

  • TokenLogic will provide analysis, estimation and monitoring of liquidity
  • TokenLogic will facilitate the creation of liquidity pools not yet in production
  • Liquidity Committee will implement on-chain transactions on-behalf of Aave DAO

Further details about the Liquidity Committee can be found here.


TokenLogic receives no payment from Aave DAO or any external source for the creation of this proposal. TokenLogic is a delegate within the Aave ecosystem.

Next Steps

Gather feedback about updating GHO liquidity for more efficient solutions, and post an ARFC snapshot vote.


Sub fed funds for a depegged stable lp seems unlikely to sustain target tvl. That’s fine, but if the goal is actually to maintain $5mm on the bal lps then either the target incentives likely need to be higher or the lps are presumed quite charitable.


Hi all, we recently made a post making the case for Sommelier’s TurboGHO vault to be included in the discussion for incentives to help create liquidity and stabilize the peg: Sommelier TurboGHO Vault

Tldr; TurboGHO will be a dynamic liquidity optimizer and peg defender for GHO. We believe that the ability of Sommelier vaults to flexibly respond to new and changing market conditions is a key component in the solution for GHO liquidity.

Curious why concentrated liquidity from Maverick and Bunni are being considered (where the DAO doesn’t have active voting tokens) versus Balancer x Gyroscope’s E-CLP Pools?

Has it been considered as an option? @TokenLogic

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Thanks for bringing this up. Indeed, Balancer x Gyroscope’s E-CLP Pools offer promising opportunities and having the voting tokens is big, the recent issues with Balancer may help to consider other potentials in the market for diversification.

Diversity in liquidity sources is not only a good practice but necessary to mitigate risks and adapt to evolving market conditions. Maverick and Bunni have caught attention particularly because of the higher capital efficiency they offer due to concentrated liquidity. This allows us to potentially maximize returns while maintaining a stable foundation.


Gn, thanks for the feedback !

Can you clarify what you mean by “Sub fed funds” please ?

Target incentives in this post include bribed votes, but not the Aave DAO voting power owned once locked, which could increase the estimated yield as mentioned in the proposal.

This proposal doesn’t either take into account the support (free votes) being received by other communities for a few more weeks, as it’s expected to partially fade away in the coming weeks.

Moreover, the Balancer incentives should start when the GHO peg situation is better, which will then bootstrap the new pools during this trial. The long term goal is to add GHO LPs in the Safety Module, which will unlock a higher incentive budget (already spent currently as it’s the cover budget).

Just shared an update of the SM proposal status here.

Thanks for sharing and excited to see the vault live !

I thought it would go live later so we were thinking about potentially including it in an upcoming strategy update.

Just dived into the Turbo GHO post, sent a few questions in our chat to better understand the underlying strategy & booked a call to discuss possibilities unlocked with this vault, let’s explore what can be done. This vault could probably be considered for POL strategies that will be proposed later imo.

Yes Gyroscope has been considered, but there are a few reasons of why we didn’t proposed it for now:

  1. As mentioned above, the goal is to propose to implement at least one of these Balancer pools the SM upgrade once these are balanced & GHO peg situation is better.

In the SM, stableswap liquidity is more efficient than concentrated liquidity for the simple reason that efficiency is less important than the amount of TVL, which is also the protocol cover.
Meaning: In case of a shortfall event, it’s more efficient for the SM to have 100M TVL of “inefficient liquidity” rather than 20M concentrated, even if both generate the same volume, as the bigger TVL will cover more damages.

(Doesn’t mean that we’ll never look into adding CL in the SM, but it’s not as easy to manage as classic LPs so probably better to start simple and offer both choices in the future to avoid reducing the amount of depositors).

  1. One of the goals of adding Maverick & Univ3 with Bunni & Liquis in addition to Balancer LPs is to diversify GHO liquidity across several exchanges.

Most of the GHO liquidity was on Balancer boosted pools which got an issue, leading to an important reduction of the GHO liquidity available on the market. Moreover, there were requests to diversify exchanges in previous proposals focused on Balancer, so we included others in terms of concentrated liquidity.

Note that the Curve strategy is being worked on and will be shared on another proposal. How the DAO will manage its CRV holdings to sustain Curve pools can impact the strategy & associated spending.

  1. For Maverick, the rewards are distributed in liquidity mining as the tokenomics are not fully live yet, so voting power is not needed atm. Once MAV emissions are live, a grant request, a token swap and/or a MAV acquisition could also be explored, otherwise we’ll be able to bribe as well.

For Bunni, it’s true that the DAO doesn’t hold veLIT but as mentioned in the proposal, allocating part of the bribe budget for UniV3 on vlLIQ (controlling veLIT) over this trial will enable the Aave DAO to be included in Liquis launch partner program & earn 0,2% of the LIQ supply. While the tokens are vested, the full voting power will be available from the start, enabling voting on GHO gauges.

It doesn’t mean we won’t look into Gyroscope in the future, especially if Curve pools can be supported there as well, but this wasn’t prioritized for this proposal.
Lmk if you have other questions !

Thanks for the feedback ! Not sure to understand what you mean, can you clarify please ?


Maybe this is answered elsewhere, but if the goal is to enforce $1 price of GHO, why bother putting resources into pairing with LUSD, which by design does not sit exactly at $1 usually?

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LUSD has problems with Stablity, but it is a stablecoin that has a high reputation on the Stablecoin evaluation site Bluechip, and unlike DAI, USDC, and USDT, it is a very decentralization currency.

Thank you for taking the time earlier in the week to better understand how our Turbo GHO vault can provide efficient liquidity @Dydymoon. We’re very excited to see the temp check pass and would very much like for the Sommelier Turbo GHO vault to be included as an incentivized protocol during the RFC stage.

For the benefit of everyone, we would like to provide a brief update on the vault’s progress, now that it has been operational for one week.

The vault has surpassed $2M in TVL making it one of the largest LPs in the GHO ecosystem. During its inaugural week, it diligently provided intelligent and efficient liquidity for the USDC-GHO pair on Uniswap v3. Impressively, over the past three days, the vault has demonstrated its exceptional performance by accounting for 56% of the trading volume while representing only 44% of the pool’s TVL.

In addition to facilitating trading, the vault has also reserved approximately 15% of its liquidity outside of the trading range, serving as a liquidity backstop to bolster GHO’s price stability. Notably, the vault accepts USDC, which means that new deposits contribute buy pressure on GHO.

We look forward to sharing further developments related to the vault as they transpire.


Hi @SevenSeas,

Thank for sharing the details on the Turbo GHO Vault. We would like to explore incorporating the Sommelier Turbo GHO vault into the broader GHO liquidity strategy.

Reallocating incentives across Bunni and Sommelier makes the most sense given both focus on Uniswap v3. The liquidity profile inside the Turbo Vault can be shaped to help bring GHO back to peg. An example of this would be to skew liquidity beneath the peg, such that any buy pressure on GHO has a larger effect than it would otherwise would have had. For this reason, as well as others, active liquidity management has advantages over passive ranges.

As we work through a revised Bunni / Sommelier strategy, we propose granting the GHO Liquidity Committee the flexibility to direct incentives to the Turbo GHO Vault. We have added a comment to this proposal which will be going up for vote in the near future. A further update on GHO Liquidity strategy between Bunni and Sommelier will be provided here in due course.

We would like to thank the Sommlier team for reaching out and there continued support for GHO.

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