[ARFC] Treasury Management: Update Balancer Ecosystem Holdings

[Dydymoon]

@fcmartinelli

I agree that overall the exposure to the Balancer ecosystem will continue with the AURA purchase.

Gm ser ! Thanks a lot for your feedback & understanding despite this being a complex topic for Balancer. Considering Aave size, optimizing the voting power & flexibility would definitely help increase the positive impacts on the ecosystem imo.

@fcmartinelli

I have to say though that from Balancer’s side (I’m speaking for myself but think other key stakeholders agree) it would be much better if the BPT didn’t have to be sold but instead used by Aave additionally to the AURA purchased, increasing Aave’s participation further in our governance.

Tbh besides not being the most efficient/flexible option for the DAO, I personally don’t have issues with option 2 which will be possible to implement once the SAM contract is deployed, if the Aave community votes for this one.

My goal here was mostly to point out every aspect of both options, especially profitability & management differences for the committee, so the community can take informed decisions.

@fcmartinelli

Balancer may have gone through some tough times with incidents but I’m convinced it will continue to be a major force among AMMs through innovation and products with actual PMF. Bear markets are a great time to double down on strategic partnerships like the one Aave has had with Balancer for many years now.

Agree and the point of this proposal is not to break the partnership with Balancer at all, but instead to grow Aave’s share in the Balancer ecosystem (1,75M AURA is 8,6% of the voting supply, allowing to control 3,55% of the veBAL voting supply)

But most importantly, you know I support Balancer growth as I’ve been trying to working on the SM Upgrade proposal over the past months, which aims to integrate Balancer V2 LPs deposited on Aura with a specific gauge design in the Safety Module, and this strategy is expected to bribe a considerable amount of both veBAL & vlAURA share, in addition to the voting power owned.

That’s also why I proposed this, because overall I’m confident that this kind of integration can benefit Balancer a lot more than just Aave DAO locking 157k BPT for veBAL (for which thanks to the BPT deep liquidity, the price impact would be minimal if sold).

---

@zilayo

I couldn’t see if a decision was ever made on veBAL vs auraBAL - if AURA was purchased via treasury funds and BPT was used for auraBAL (instead of veBAL), would this have a considerable effect on the weekly emissions calculation in the op?

Gm, thanks for your feedback ! My focus was always about increasing the strategic voting power of the DAO to reduce emissions over time. I didn’t included auraBAL in the options because it’s not possible to vote with it (users depositing BPT for auraBAL increase their yield but give up their voting power, which is controlled by vlAURA holders)

If the BPT were deposited for auraBAL using the classic staking (as the rewards should then be used for bribes to answer your question above) it would generate 18% APR atm. The 157k BPT position is worth $1,5M.

($1,5M x 18%) / 52 = $5,2K per week, received in two tokens (BAL + auraBAL)

• If these $5,2k were used to bribe vlAURA at current average price, it would generate $8,4K/week, which is actually slightly higher than locking for veBAL, but lower than locking for vlAURA.

• If these $5,2K were used to bribe veBAL at 1,01x efficiency, it would generate 5,25K/week (note that this means bribing at 0,048$/veBAL/week, which is lower than what most projects currently pay)

I didn’t take into account the compounder yield as it would complicate even more the rewards recycling for bribes & because the APR shown is for the past 7 days so might update often.

Finally as most rewards are distributed in auraBAL, using it as bribes, or selling it to bribe with GHO for exemple would both have a bad effect on the auraBAL peg.

EDIT: Small confusion on the sentence above, rewards on the classic staking are distributed in BAL + AURA, unlike the compounder staking receiving most in auraBAL, so the option of using classic staking rewards as bribes wouldn’t impact auraBAL peg.

---

@0xkeyrock.eth

The parallel proposals being placed by @Dydymoon and @TokenLogic are probably confusing members that are not extremely involved into Aave Governance and assume that @Dydymoon is a contributor with @TokenLogic.

Gm ! I’d like to specify that while I have contributed to some proposals at Llama over the past 2+ years & some proposals at TokenLogic over the past 5 months, this shouldn’t block me from posting proposals with my own account as I’ve been a DAO contributor and community member for 3+ years with Aave’s best interest in mind.

I kinda always did this type of proposal, even before service providers became “a thing” (without asking compensation as it’s not my focus), and even if that involves political topics such as this one.

Anyway, I was also surprised to see another TL contributor commenting against this post as I communicated about posting it with my account, and because numbers don’t lie so it’s a weird move to go against that.

@0xkeyrock.eth

@Dydymoon you mention a split of 10 orders for the TWAP. As this intent is quite public and traders can frontrun it based on the expectation that the DAO will acquire over 1M AURA - what price protection have you considered? For optimal execution, we would probably split it enough so that the size is less than 10-15% of the daily trading volume.

As you say, it’s complex to define price protection for an acquisition that needs to be approved by governance before, however as explained in the following article, the TWAP orders by Cowswap have interesting features:

• Price protection: TWAP order won’t execute if the market price dips more than the defined percentage (calculated from the asset price at the time of order submission).
• Ability to split the swap to several parts and estimate amount per each swap part
• Estimation of execution time total & by order

According to Coingecko, the 24h trading volume is $270K, so usings 15% of this would mean $40K per swap so a total order split of 25. This can be done I guess, and it would reduce the slippage from 5-6% to 3% atm, but the acquisition would require more time.

With this order size, maybe we can use 5% of price protection, but for higher order we might need to increase it.

Thanks a lot for your feedback !

@MarcZeller

sometimes it’s not about the most mathematically efficient path in the short term, but about the synergies and relationships we create over the years.

Gm, thanks for your feedback.

As mentioned in this comment above, swapping BPT would have a small negative impact, while integrations like the SM Upgrade will bring important benefits to Balancer.

@MarcZeller

We will cast a NAY vote on every option of this ARFC, we are supportive of a progressive exposure to AURA, but reject any “dump” of our BPT holdings.

I understand the support for Balancer, but you recently proposed to acquire $2M worth of CRV to support the liquidity and recently published a proposal to reduce AAVE emissions spending, so it’s a very strange decision to refuse a $1M worth of AURA acquisition when most of the AAVE and a good part of GHO liquidity are on Balancer. Can you explain the rationale behind this please ?

Also, you’re the first to support “NAY” in the comments instead of another solution that enables the DAO to increase its strategic voting power.

As voting no means to not take actions on strategic assets to support GHO atm and pass on an OTC deal, can you elaborate on an alternative if none of the options is good enough for the ACI please ?