[AIP-34] Introduce Additional wstETH Reward Tokens to ma3WETH/wstETH

Proposals
1

This proposal has been co-drafted by @0xloth, a contributor to Morpho Labs, and @Carvas, a contributor to Lido.

Background

Morpho Labs deployed a ma3WETH/wstETH composable stable pool. Balancer governors voted positively to:

  1. Add a gauge for the ma3WETH/wstETH on Balancer
  2. Make this ma3WETH/wstETH a Balancer “core-pool”

The Lido DAO’s reWARDs committee has budgeted liquidity incentives for the first month to help bootstrap this pool.

Protocol Overview

Morpho is a lending protocol, built on top of Aave & Compound that matches borrowers and lenders’ liquidity peer to peer, improving APY on both sides. TVL is hovering around $752m, and the protocol has been audited more than 20 times by the audit’s majors.

Lido is a liquid staking protocol for Ethereum and other proof-of-stake tokens. It allows users to stake their tokens without needing to run staking infrastructure themselves, all along while remaining liquid and able to use that capital elsewhere in DeFi. Users who stake via Lido receive daily staking rewards simply by holding the stTokens. Lido’s TVL currently sits at $12.7B.

Proposal Overview

This proposal seeks to get the option to add additional rewards to the ma3WETH/wstETH on Aura. Receiving veBAL votes in the market doesn’t always follow a predictable pattern, and there are situations where the actual results fall below what could be initially expected.

Specifically, the ability to contribute direct wstETH rewards to the pool would be useful as an additional mechanism to help bootstrap the pool in question.

Vault technical implementation

A vault based on the ERC4626 standard has been created for this purpose. This vault was audited by Spearbit, a top-tier audit company.

Pool address: 0xC5DC1316AB670a2eeD5716d7F19CeD321191F382

gauge address: 0x8eeB783A4A67f626c6E3952AAeD0D6b104AaC85f

The code can be found here. The vault contract can be found here

Specification

Aura DAO multisig will call setStashExtraReward on this “wstETH stash” for the ma3WETH/wstETH pool. A new “VirtualRewardPool” would be created, and would allow wstETH (reward token) to be sent to this stash, queuing it on the new virtual reward pool. Any reward token sent there would be queued over the following week.

Voting Procedure

The intention is for this proposal to go to vote in the Snapshot round commencing on Thursday, June 22. Please review and provide any questions or comments through Thursday, June 22. We appreciate and encourage an open discussion.

The vote will follow a single-choice format: “For”, “Against,” or abstain from voting

4 Likes
2

Hello @0xloth and @carvas - thanks for posting this temp check. We have a few questions for you.

  1. Can Morpho provide its long term vision of incentives for this pool? Does Morpho plan to go with the model of only wstETH rewards to the pool, while not participating in AURA and BAL gauges?

  2. This temp check and Morpho’s BIP for this Balancer gauge mentions Lido liquidity incentives for a one-month bootstrapping period for the pool. Are these incentives the same as or different from the additional wstETH rewards referenced in this temp check?

  3. Does Morpho have any parameters for when the wstETH incentives will be provided directly to the pool rather than via the vlAURA and/or veBAL guages? If so, what are those parameters?

  4. How long does Morpho intend that the additional wstETH rewards will be available?

3

Welcome to the Aura ecosystem, brother–big fan of both Morpho and Lido. I support this proposal.

2 Likes
4

In a fully saturated voting market allowing protocols to do direct LP incentives has a lot of benefits. Aura contributors have repeatedly told me they’ve had to tell partners to reduce voting incentives lately to protect a positive ROI so there should be little contention vlAURA is at full saturation.

Providing direct LP incentives brings TVL/revenue/volume that Balancer & Aura does not have to “pay for” with emissions. Since this is a core pool there will be voting incentives placed on it for vlAURA from protocol fees so it will have a direct positive impact for vlAURA holders, as well as indirect benefits (better Balancer protocol metrics).

Bootstrapping this pool at least partially with direct LP incentives then having core pool voting incentives kick in to fuel additional growth is a good strategy here in my view for all parties involved.

4 Likes
5

Yeah - we discussed this the other night in the governance channel. Generally agree. Simply asking theses questions to help the community understand the parameters around additional reward incentives.

Im also pretty sure the last round was not at full saturation.

@0xloth - in addition to answering those questions, can you also edit the temp check to include a voting procedure?

6

Hey good questions, speaking personally here:

2- Lido’s reWARDs committee has budgeted liquidity incentives for this pool, as @0xloth said. They are to be distributed in wstETH denomination, and would afaik be the ones enabled by this proposal passing.

1&3- I am in complete agreement with what @solarcurve mentioned in his response.
Enabling this additional means of incentives to the pool (direct wstETH to LPs) is purely beneficial to every stakeholder involved:

  • Lido’s reWARDs committee and Morpho get flexibility on how they can direct rewards;

  • veBAL and vlAURA vote markets get less saturated, allowing other projects to still be interested to participate in them over time;

  • Net new incentives can go to these LPs that wouldn’t have gone otherwise. Without this passing, there will be strictly lower interest in incentivizing as whenever the vote markets are saturated, any extra marginal spend is difficult to justify.

  • I think there will always be interest in going the route of vlAURA and veBAL gauges if those make sense at any point in time, but adding optionality here allows the existence and size of incentives to not depend on them.

  • In general, direct incentives enablement is the way balancer’s overall pie of incentives can grow beyond its own fixed emissions program. The way to not be capped by that self imposed limit.

4- Think it should always depend on market reaction, growth data, etc instead of a too rigid initial plan.

1 Like
7

Thanks, @carvas. One of you or @0xloth should update the voting procedure in the temp check.

1 Like
8

Hey @Matt_AlfalfaOrSpanky
Fully aligned with @carvas and @solarcurve answers
Regarding the voting procedure, I added the following. Lmk if that’s what you were expecting

2 Likes
9

https://vote.aura.finance/#/proposal/0x4e5f7d7d215c0afe9a96a9aed891e73a872e17fe5209f1d2ec9c55072af0f022

1 Like