[TEMP CHECK] Safety Module - Create GHO/USDC E-CLP Category


title: [TEMP CHECK] Safety Module - Create GHO/USDC E-CLP Category
author: @karpatkey_TokenLogic
created: 2024-05-13


Summary

This publication proposes creating a new Safety Module (SM) category for the GHO/USDC E-CLP by Gyroscope built on Balancer v2.

Motivation

Similarly to Staked ABPT, the ability to stake GHO liquidity pool tokens improves the value proposition of the SM by providing the dual service of deep GHO liquidity and protection in the case of protocol shortfall events. Additionally, Liquidity Providers (LPs) can also benefit from earning trading fees.

The Gyroscope protocol developed a concentrated liquidity AMM called Elliptic Liquidity Pools (E-CLPs) that sits on top of Balancer. This technology achieves liquidity efficiency by providing assymetric liquidity to a specific price range based on parameters like amplification, price boundaries and peak location. More information about E-CLPs can be found here.

With GHO trading close to $1.00 and the GHO Stability Module to be funded, now is an ideal time to add a GHO LP to the SM. By adding the GHO-USDC E-CLP, it is expected to significantly improve market depth as well as USDC liquidity with the SM. Unlike other pool types on Balancer, the E-CLP requires dual asset deposits upon entering the LP.

The Aave Liquidity Committee (ALC) developed expertise on the E-CLP technology designing and incentivising one pool optimized for volume when closer to peg and another pool optimized for price volatility.

Specification

After studying various configuration of Gyroscope’s E-CLPs, karpatkey_TokenLogic recommends adding the following E-CLP to Aave’s SM.

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Create a new GHO/USDC E-CLP SM Category with the following characteristics:

Description Value
Lower Bound $0.996
Upper Bound $1.001
Peak 0.9995
Amplification 1,250

The following initial E-CLP SM parameter configuration is proposed optimizing emissions for a target liquidity of $5M at 20% APR:

Description Value
Emissions Nomination GHO
Daily Emission 2,750
Slashing Rate 50%
Cooldown Period 20 days

This proposal also recommends that GHO/USDC E-LCP is included in FastPass with the following initial parameters:

Description Value
FastPass Fee 100 bps
Fee Destination Collector Contract
Daily Withdrawal Limit 500k

In addition to the above, we also recommend implementing the strategy detailed in this forum post which enables the DAO via the vlAURA hodling to vote BAL and AURA rewards to this SM Category. This option then enables the Aave DAO to use is strategic assets to partially sustain the SM category.

Disclosure

TokenLogic and karpatkey receive no payment for this proposal. TokenLogic and karpatkey are both delegates within the Aave community.

Next Steps

  1. Gather feedback from the community and risk service providers.
  2. If consensus is reached on this ARFC, escalate this proposal to the Snapshot stage.
  3. If Snapshot outcome is YAE, escalate this proposal to AIP stage

Copyright

Copyright and related rights waived via CC0