Gm @ApuMallku, sorry for the late reply !
The SM update is a complex & important topic which didn’t receive much feedback so wanted to make sure everyone had the time to read, understand or ask questions if needed
In addition, there are two reasons about why SM Update ARFCs are not live yet:
- SM strategy rework needed - Part 4: Consequence of AIP-42 (More details below)
- GHO depeg issue making stableswap liquidity counter effective right now.
Note that the proposal is still being worked to adapt to the current market metrics. From Llama’s side, the code supporting veBAL position is already implemented via the StrategicAssetManager contract and can be deployed pending community feedback.
There is a discussion currently on vlAURA support; if it makes sense technically and the community approves the vote, Llama can add vlAURA to the StrategicAssetManager.
SM Proposal Updates:
This proposal is split between 6 sub-parts with a breakdown & updates explained below:
- Part I: Migrate AAVE/WETH v1 to AAVE/wstETH v2:
This migration could be implemented anytime, no blocker on this proposal if shipped alone.
- Part II: Assets diversity, SM Categories & Slashing updates:
The categories & slashing parameters proposed should remain unchanged in the ARFC, however the assets list proposed will be updated to focus on stable LPs & adapt to the liquidity strategies voted.
- Part III: Enable smBPT gauges
The concept of smBPT gauges has been approved by both Aave & Balancer DAOs. In practice, this will require a wrapper contract in the SM, minting smBPTs for BPTs, and specific proposal on Balancer for each gauge but this part is dependent on the next parts.
- Part IV: Incentives Management Upgrade:
This part is currently being reworked to adapt to recent ecosystem changes caused by AIP-42 early August on Aura governance which impacted the SM estimations. I posted a TEMP CHECK explaining AIP-42 potential impacts & open the discussion about the next steps in this proposal to update Balancer Ecosystem holdings which is being voted on.
Basically after AIP-42, the emission power changed depending on if holdings are veBAL or vlAURA, however some projects didn’t understood the impacts, leading them to overpay for bribes. It also impacts veBAL holders (less attractive than vlAURA), which explain the proposal above to update the strategy before locking.
If approved, @TokenLogic will propose options to handle the B-80BAL-20WETH unlocked in the treasury, look for options to acquire AURA OTC (TokenLogic & ACI already closed a time sensitive deal), and @Llamaxyz will submit an ARFC to add vlAURA support to the StrategicAssetManager.
The other part complex to predict is the proportion of vlAURA votes / total votes bribed. Until AIP-42, the emissions were equivalent, but now, whether the split is 20% veBAL 80% vlAURA or the opposite really changes the results.
The bribe market irrationality & the new split below complexifies accurate estimations, especially for a project of Aave size, but solutions are being explored so part 4 will be updated in the ARFC for sure.
- Part 5: veTokens Management framework
This post proposes to elect a committee & define a framework to manage operations related to strategic assets. Considering that this part was highly needed, and most likely before SM implementation, Llama built the StrategicAssetManager contract v1 including veBAL support, and will update to v2 with vlAURA support if approved.
TokenLogic recently submitted a proposal to create & fund a liquidity committee for a different purpose initially, but it can be assumed that the committee scope will increase over time, and could include the SM.
So part 5 is kinda already in work, SAM contract & committee scopes will only require updates once needed.
- Part 6: Future considerations
This is the only part not voted yet on TEMP CHECK as it’s better to have everything else above live for considerations to:
- Include protocol owned liquidity in the SM which partially self insure
- Define a framework for new assets (which could increase the max budget)
- Allocate a portion of GHO earnings to replace AAVE emissions
GHO situation
The GHO depeg is another consideration for the SM upgrade implementation atm, which wasn’t assumed when the proposal was created as GHO wasn’t live yet.
One of the goals of the SM proposals is to incentivize GHO liquidity & protocol cover with the SM current budget, which means a lot of incentives so a lot of stableswap liquidity, which is the counter effective to get GHO back at peg as it will just cost more to do it.
That’s why I mostly focused over the past weeks on the GHO Liquidity Strategy Update & Liquidity Committee that we recently published with TokenLogic.
The recent issue with boosted pools also impacted the liquidity, which is bad for GHO long term but helpful short term, as it will enable it to restore the peg with less buying pressure, which can initially be started with the DAO expenses (for example, TokenLogic SP proposal requested 100% of the funding in GHO and others might follow).
Buying pressure coordinated with liquidity strategy should help improve the peg situation and enable to rebalance the pools on Balancer with arbitrages, to then follow up with the SM ARFCs and implementation if approved.
Hope this update is helpful. Lmk if you have any additional questions !