Author: philjfry + Tritium
Summary
This proposal:
- Suggests basic, non-binding guidelines to define an “unhealthy gauge”
- Uses these guidelines to analyze the wstETH/ETH pool and DIGG/WBTC/graviAURA pools that are currently receiving more than 10% of the veBAL vote
The guidelines defined here are intended to act as a base for future discussions of similar gauges earning over 10% of the veBAL vote share.
Based on these findings, this governance recommends exclusion of WBTC/DIGG/graviAURA from the list of vlAURA voting options until it has less than 10% of the voting veBAL voting share.
It is important to note that this governance applies only to AURA voting on Balancer gauge weight votes. This AIP does not suspend any Balancer or AURA gauges under any circumstances.
Background
The growth of AURA requires emissions to bring new users and DAOs into the system and to generate revenue for AURA stakers through incentives paid for votes. With this in mind, pools receiving a large portion of the veBAL vote weight should ideally meet at least one of the following conditions:
- Have a wide/diverse holder base.
- Pay near or above the average incentive rate for those votes. However, buying more than 50% of the system wide emissions with incentives for more than a round or two may start to become a concerning centralization vector.
- Generate noteworthy fees for Balancer that increase auraBAL USD emissions or core incentives.
On what is healthy
This AIP proposes the following non-binding parameters for determining whether an Aura gauge pool is unhealthy. Note that any gauge with less than 5% of veBAL voting is excluded from the scope of this proposal, as in most conditions, a gauge with less than 10% of the veBAL vote is not a cause for concern.
If a gauge is receiving more than 10% of veBAL voting, its health should be evaluated on the following factors (the more criteria met, then the more likely to be ok above 10%):
- Is it a top performer in terms of revenue generation and/or otherwise identified as beneficial to the ecosystem by BalancerDAO or Aura?
- Is it a core pool?
- Are LP HOLDings widely spread, i.e. not concentrated?
- Does it include only very high mcap and liquid coins that make it easy for others to invest and dilute LP concentration?
- Are high incentives being paid into the system on a regular basis to achieve this vote weight?
What is healthy applied to the current pools
The following pools have over 10% of veBAL voting for them:
- wstETH/ETH, which just received 6.95% of the Aura gauge vote that closed on August 8
- WBTC/DIGG/graviAURA, which just received 13.76% of the Aura gauge vote that closed on August 8.
The wstETH/ETH pool (16.13% veBAL + 6.95% Aura) is:
- A top earner
- Deemed significant by Balancer through its core pool designation in BIP-19
- Has well diversified LPs
- Only consists of megacap coins that allow functionally unlimited entry without significant price impact.
Its health in relation to the ecosystem is clearly established; it therefore has good reason to receive more than 10% of the veBAL gauge vote and to be considered a healthy pool under the parameters of this proposal.
The WBTC/DIGG/graviAURA pool (34.79% veBAL + 13.76% Aura):
- Does not generate exceptional fees.
- Is currently seen by the Balancer community as a bit of a governance attack at current vote weight.
- Has highly concentrated LPs
- Risky and difficult for new buyers to enter this pool because
- DIGG is a smallcap (<10 million MCAP) with 50% of total supply already in this pool
- Several large buyers have established overly-concentrated pool positions and have driven up the price.
Details
Holdings:
For more details about DIGG pool holdings see Digg pool breakdown - Google Sheets.
The top 3 hodlers hodl over 56% of the pool:
- TheOne a/k/a HumpyDumpy and/or a group they appear to represent holds 27.31% of the pool.
- The BadgerDAO Treasury holds 17.76% of the pool.
- Badgerboss.eth holds 6.12% of the pool in Aura and an additional 5.35% of the pool staked in the Badger vault for a total of 11.47% of the pool
A total of 57% of DIGG total supply is currently in the Balancer pool for this LP. This means that the above 3 hodlers hold over 30% of the total DIGG supply in this Balancer pool in some fashion.
Source: $13,767.52 | Digg (DIGG) Token Tracker | Etherscan
It is therefore clear this extreme voting for the DIGG gauge of 10% or more of the veBAL gauge combined with the Aura gauge votes is unhealthy for the ecosystem.
Basis for Action
Per the Aura documentation Gauge voting - Aura Finance, a pool should be excluded from the vlAURA vote list should it be deemed harmful toward the Balancer or Aura ecosystems: “Gauges which substantially harm the Aura/Balancer ecosystem or that have been explicitly blacklisted by community proposals will be excluded from the list of options.”
Action(s) to be taken
Based on the framework and justifications above. This governance:
- Determines that the wstETH/ETH gauge is a healthy pool that will be allowed to continue to receive Aura votes, regardless of its veBAL vote weight.
- Determines that the WBTC/DIGG/graviAURA pool, which is currently receiving 34.79% of the veBAL gauge and 13.76% of the Aura gauge, represents an unhealthy gauge for the Aura and Balancer ecosystems.
- Instructs Aura to exclude the WBTC/DIGG/graviAURA gauge from snapshot voting so long as it has more than 10% of the veBAL at or around the time of posting the snapshot.
Voting
This vote will be a single-choice vote. You may vote “For” or “Against” this proposal, or choose to abstain from the vote. By voting “For” this proposal, you are voting in favor of the terms stated above.
For additional commentary, view the Temperature Check on this AIP here: [Temperature Check] Temporarily remove DIGG from voting list - #36 by 0xGalahad