[ARFC] Treasury Management: Update Balancer Ecosystem Holdings

Disclaimer: karpatkey is an active contributor in both Balancer and Aura’s ecosystems, the former as official Treasury Managers of the BalancerDAO, and the latter through GnosisDAO’s holdings (Mainnet; Gnosis Chain) in AURA ($1,882,810), auraBAL ($19,115.38), veBAL ($869,233) and stkauraBAL ($3,444,056).

Thanks @Dydymoon for addressing what in our opinion is an extremely relevant topic for the long-term strategic positioning of the Aave DAO.

We might have a better alternative, but first, here are our thoughts on the two proposed options:

Option 1: Convert to remaining BPT to AURA

Aave is part of the Balancer ecosystem through its BAL, aBAL, aEthBAL, and veBAL holdings, and this proposal would decrease the monetary value of BAL emissions, which would ultimately hurt the Aura ecosystem and negatively affect the intended outcome of this initiative.

Moreover, Balancer is historically deeply rooted in the mechanics of the Aave protocol both through the Safety Module and aToken Balancer Boosted Pools. We believe such a relationship should be kept symbiotic and not value extractive.

Option 2: Keep remaining BPT & acquire AURA to lock both

We’re generally supportive of expanding Aave DAO’s AURA holdings to increase its emission power on Balancer. However, we think the DAO should avoid deplicting its reserves of stablecoins to secure a sustainable runway and ensure treasury diversification.

karpatkey’s Option 3: Increase AURA ownership while protecting Balancer and securing treasury stablecoin holdings

In our opinion, there’s a better way to optimise this proposal’s underlying objective—to increase Aave DAO’s emission power on Balancer—while guaranteeing a positive outcome for every stakeholder.

We propose to:

  • Mint auraBAL using B-80BAL-20WETH;
  • Buy OTM $GHO 300K worth of AURA; and
  • Swap $200k worth of AURA for AAVE in an OTC deal with AURA DAO (we’ve gauged AURA DAO relevant stakeholders’ availability and commit our 10% voting power in favour of this).

This way, we ensure that:

  • No BAL gets dumped on the market and veBAL power of Aura Finance is increased;
  • Aave has a steady source of AURA and auraBAL, which can increase future voting power;
  • Total emission power increases from $10.1k/week to $11.1k/week (calculation and assumptions below);
  • Aave treasury isn’t impacted dramatically, as only $300k GHO are spent for increasing its current voting power, and $200k worth of AAVE, which is not significant considering the current treasury holdings;
  • Additionally, this deal onboards Aura DAO into Aave.

Calculations and assumptions

  • We assume that we can effectively swap $300k GHO for 350k AURA. Due to low market liquidity, this trade would have to be split into multiple TWAP orders;
  • OTC deal would swap 3,134 AAVE for 245,800 AURA;
  • We use the same emissions power as in the original post: $0.046/week per veBAL and $0.0063/week per vlAURA;
  • Voting power would likely be higher, as vlAURA voting power would increase after Aura Finance increasing its protocol-owned veBAL.