[Discussion] Safety Module

[Dydymoon]

@John_TV_Locke

Is it fair to characterize the proposed changes into two groups?

You could actually define 3 groups:

• Single assets (AAVE & ETH/LST)
• Volatile LPs (Pools Including AAVE or ETH)
• Stable LPs (Pools including GHO and/or other stables)

However the Aave voting power is not sufficient to drive enough incentives to the sm gauges so the goal would be to create vote incentives, but since the DAO will probably still vote with part of its voting power it will receive AAVE rewards for it, reducing the DAO costs.

@John_TV_Locke

Goal 2 is interesting but I think the juice won’t be worth the squeeze. Using end-of-year numbers, the sim below shows at different BAL prices and SM staker yields how much value would be added to the SM. Even at the most optimistic assumptions, it is an additional $6.5mm deposited in the SM. Note that this doesn’t include AURA rewards and would acquire the necessary ETH for a veBAL position.

As mentioned earlier, I agree that the veBAL voting power and boost are not sufficient to support this kind of initiative at the moment, especially considering all the potential other initiatives concerned by this voting power (StakedATokens, Treasury Management, GHO Liquidity and potentially the SM)

As the strategic voting power of the DAO will grow, its emission capacity will also increase over time, allowing to partially sustain these goals. Until then, other solutions can be considered to attract more votes:

One part of the strategy proposes to use part of the current SM budget (1100 AAVE/Day) to create vote incentives for veBAL/vlAURA and potentially any other wrapper that can vote.
This would considerably increase the capacity emission on the SM gauges by leveraging the premium on votes incentives vs liquidity mining without raising the DAO expenses.
(This also allow to considerably increase its strategic voting power and partially self insure in case of POL strategy)

@John_TV_Locke

Perhaps we could solve for how much value should be locked in the SM and can back out how much initial investment that would cost.

Agree on this point, even a bigger reward budget this does not create endless incentives, so adding a TVL cap for each assets in the SM would help to attract enough votes for the right estimated yield, as well as adding flexibility for incentives management.

@John_TV_Locke

What is the justification for the first goal: increasing the asset diversity?

The justification is to progressively reduce the AAVE dependency by increasing the assets receiving rewards (ETH & Stables) and creating a stable category with the highest slashing and yield, which should reduce the total amount of AAVE in the SM.
The Aave governance could also discuss about a framework and requirements to add new assets as well as managing the assets cap.

@John_TV_Locke

Excited to see the other proposals and thinking here! Beyond recommending adding ETH/wstETH/stables to the SM, will think on ways to reduce the cost of insuring the protocol as well.

Thanks again for all the suggestions & feedback !