Proposal: Add Support for BOND (BarnBridge)

Governance
1

Summary

Add BOND to Aave v2.

Abstract

BarnBridge is building a suite of applications that allows users to mitigate risk across various use cases throughout DeFi. These applications rely on differentiated user profiles, referred to as tranches, in order to create markets for risks such as interest rate fluctuations and asset price volatility. Currently, SMART Yield has over $180M in TVL, while SMART Exposure and SMART Alpha are slated for Q2 and Q3 of 2021, respectively.

The BOND token is used to govern the BarnBridge DAO and allocate protocol resources. Additional functionality is being worked on, related to backstopping certain new features currently under development.

Motivation

BarnBridge is one of a handful of DAOs noted for its sizable allocation of its own native asset (see: open-orgs.info). It currently holds over 30% of the total BOND supply.

Adding BOND to Aave would provide a mechanism through which the DAO could finance growth, decreasing the need for excessive token distributions. Example use cases include: funding projects building on top of BarnBridge applications, paying salaries to key protocol participants, and hosting bug bounties that earn yield until paid out.

BarnBridge earns fee revenues from both deposits of underlying assets and redemptions of derivative assets.

By adding BOND as collateral, the DAO and individual BOND holders can borrow against their position, increasing stablecoin demand and utilization on Aave v2. Additionally, BOND holders can lend out their position for a yield on Aave v2. Given BarnBridge’s direct role as an Aave liquidity provider, the addition of BOND to Aave v2 creates more synergies between AAVE and BOND holders.

To start, it may make sense for BOND to have a conservative LTV and liquidation threshold which can be fine tuned further down the line.

Rationale

BarnBridge will continue to grow as a distributor of Aave v2 stablecoin markets as its SMART Yield integration gains further traction. There are currently ~$109M worth of stablecoins deposited into Aave v2 through SMART Yield. This liquidity is provided without any expectation of being used, meaning BarnBridge is a pure liquidity provider for Aave. BarnBridge is also actively building an integration with Aave’s Polygon market. Future BarnBridge products, including SMART Alpha senior tranches for assets like wBTC and ETH, stand to provide Aave with relatively safer collateral given their ability to mitigate price drawdowns.

Oracle

A BOND/ETH Chainlink feed is available.

Liquidity and Holder Base

BOND has been trading for more than 7 months. BOND is primarily traded on Gemini and Uniswap. Uniswap holds $1.9M of liquidity in the BOND/ETH pool and $23.1M in the BOND/USDC pool.

BOND Holder Base


Nansen

Audits / Security Reviews

All audits can be found here: BarnBridge-PM/audits at master · BarnBridge/BarnBridge-PM · GitHub

References

Next Steps

We welcome any feedback from the community. Please vote in the poll below (closes 6/23).

If the poll wins, we will propose risk parameters for the community to review.

Should BOND be added to Aave v2?
  • Yes
  • No

0 voters

6 Likes
2

We have big plans long term for AAVE. This would be a great step towards strengthening our two protocols relationships. I’m especially excited about your NFT markets. However, we have some protocol enhancements coming out in the next 8-12 weeks that I think will substantially boost our TVL to AAVE (along with the Polygon updates).

3 Likes
3

If any AAVE community members have further questions or concerns, please feel free to reach out to the BarnBridge community in the Discord or email me at max.fiege@barnbridge.com.

2 Likes
4

Support will enable BOND holders to be able to borrow against their position for stablecoins on AAVE (i.e. use BOND as collateral)? Count me in!

1 Like
5

For those community members not familiar with Barnbridge, our Smart Yield platform already has over $100 million TVL locked in Aave:

https://app.barnbridge.com/smart-yield/markets

Being able to use the BOND token earned by using the Aave Smart Yield pools on Barnbridge as further collateral on Aave would allow for another symbiotic loop to exist between these two platforms.

3 Likes
6

Look forward to the AAVE community weighing in on this. I think we would be a great addition especially with everything that Tyler is saying above that is coming.

I’m wondering what they think about adding a token that is actually bringing value to their platform from a security perspective and if there are any additive properties for that.

7

Seems like a natural fit as it’s already interconnected with AAVE through the product, is a functioning DAO and the token has been around quite awhile

8

When you discover this project, you will be shocked. This fits perfectly with what AAVE does. I raise my hands to show my support!

1 Like
9

In anticipation of presenting a corresponding AIP, I’ve conducted a self-assessment of BOND’s risk to AAVE below. Please note, grades are assessed on the basis of precedent established with previous tokens supported on AAVE. Additional caveats are provided as well. Suggested risk parameters are provided.

Risk Analysis (C Overall)

  • Smart Contract Risk: C-
    • Number of Days: 237 Days (C-)
    • Number of Transactions: 116,600 (C-)
  • Counterparty Risk: B
    • Centralization: 6,270 Holders with no DAO member holding more than 5.8% and only 22% of fully-diluted token supply set aside for insiders (B-)
    • Trust: BarnBridge is completely run through its DAO with no real-world legal entity in place (B+)
  • Market Risk: C-
    • Market Cap: Pivot around $100M and recently recorded an ETH-denominated all-time high despite aggressive emission schedule (C-)
    • Liquidity* (Avg. 24-Hour Volume) (D+)
      • 1 Week: $2.4M
      • 1 Month: $2.2M
      • 3 Months: $2.5M
      • 6 Months: $2.6M
      • 1 Year: $2.4M
    • Annualized 31-Day Rolling Volatility* (C-)
      • 1 Week: 162%
      • 1 Month: 160%
      • 3 Months: 148%
      • 6 Months: 164%
      • 1 Year: 175%

*These data points were garnered prior to last week’s Coinbase listing. Daily volume has improved drastically, by a factor of two on average over the past week, but volatility remains outsized.

Suggested Risk Parameters

  • Collateral: Yes
  • LTV: 25%
  • Liquidation Threshold: 35%
  • Liquidation Bonus: 15%
  • Reserve Factor: 35%
4 Likes
10

4RC is in full support here to expand the tokenomic synergies between BarnBridge and Aave and we intend to provide BOND liquidity.