[AIP-4] Boost protocol fee to auraBAL to increase Aura’s veBAL intake

Proposals
1

Authors: 0xButterfield (Aura)

Summary

Balancer’s Core Pools proposal was recently enacted, which has led to considerable changes in system revenue directed toward auraBAL and vlAURA. This proposal aims to adjust active participation rewards such that the acquisition of veBAL via auraBAL is prioritised, as this is Aura’s core competitive moat. Given this need, and the current pricing of AURA and high returns of the pools, the suggestion is to re-weight fees towards auraBAL and slightly increase the overall fee take. The increase in auraBAL rewards and subsequent decrease in vlAURA rewards is offset by the significant, structural bribing revenue for the vlAURA market on Hidden Hand.

Background

The cornerstone of Aura’s success is veBAL acquisition; it is arguably Aura’s key moat.

After the successful initial bootstrapping period, the auraBAL staking pool was designed to help support this goal with three sources of rewards:

  1. Balancer system fees in bb-a-USD and BAL
  2. A percentage of all BAL earned on Aura
  3. BAL rewarded from veBAL gauge

For all BAL earned from the above sources, AURA is also minted just like BPT pools.

One of the key effects of the Core Pools proposal for Aura has been the significant movement of system revenue from auraBAL to vlAURA; the system revenue (1) is given as bribes to vlAURA voters. These bribes, combined with third party bribes from DAOs seeking liquidity, has increased bribing revenue for vlAURA holders. In the last voting cycle, vlAURA holders delegated to Hidden Hand made a 2.4% ROI on the value of their vlAURA. Assuming this figure annualizes, this equates to an ROI of over 120% per year.

This proposal aims to address this change as a first step to increasing the returns for auraBAL staking, in order to ensure the protocol continues to acquire enough veBAL to reinforce the whole system.

Another point to consider is the current state of rewards with regards to the AURA price, which has let to generally high yields on the farming pools. Since returns on high, it gives credence to the idea that top level fees could be slightly increased with beneficial effects to the system as a whole (primarily through the accumulation of more veBAL voting power, increasing the potential gauge boost of pools on Aura) if there is a re-weighting favoring auraBAL.

Aura fees

Summary of Aura protocol fees on BAL revenue generated by Balancer LPs on Aura:

  • auraBAL: 5.5% of revenue is distributed as BAL, with AURA minted pro-rata on top, to auraBAL stakers
  • vlAURA: 11% is distributed to vlAURA lockers as auraBAL (BAL → 80/20 BAL/ETH BPT → auraBAL)
  • Harvest: a 0.5% reward in BAL is given to whomever calls the harvest function for each Aura BPT pool

Proposed changes

Change the fee rates to the following:

  • 15.5% auraBAL (+10%)
  • 4% vlAURA (-7%)
  • 0.5% Harvest (no change)
  • => 20% total (+3%)

Voting

This forum post will be live for just under a week before the Snapshot proposal goes live. Replies to this post should be used for an open discussion on the subject.

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 favour of changing the fee rates of Aura in accordance with the specification set out in this proposal.

4 Likes
2

Supportive!

The accumulation of veBAL is of essence for Aura - as you said, the core moat. With large initial tranches of veBAL starting to come off lock in the coming months, it is important that Aura makes every effort it can to incentivize additional BAL to enter Aura over plain staking. Increased veBAL share will increase gauge boosts on Aura, while also making vlAURA rewards probably much more lucrative over time.

Of note, there is an immediate decrease in vlAURA rewards with this proposal. But as stated prior, this should be easily offset by long-term growth in Aura’s Balancer TVL and veBAL share, along with a rapidly growing bribing market via HH (emphasis on the 2.4% ROI vlAURA HH delegates made last voting cycle).

1 Like
3

Also supportive

long term growth is key for the success of AURA

4

This one looks good to me–well written, brother. I support as is.

5

looks good to me. I’d support something even more aggressive than this too - maybe just take vlAURA’s share straight to 0 and go all in on auraBAL. Given that as Aura’s share of veBAL increases so does vlAURA’s share of the core pool bribes, it’s not a stretch to imagine vlAURA would actually make MORE money by giving up the tiny APR from protocol revenue in exchange for accelerating Aura’s accumulation of more veBAL.

This is a good start at least.

4 Likes
6

Moving some vlAURA rewards to auraBAL sounds great, and I am in full support, I also agree with @solarcurve that you could move all of them, so long as the AURA bribe market is sufficent to support a decent yield on vlAURA via bribes. I have a few more questions about reducing yields on the farms.

It seems like this involves a systemwide fee increase for farmers from 16% to 20% (you then said +3% and I don’t quite understand this math).

This feels like a very steep increase on the farms that also have to be loved and competitive before this thing works.

at a 20% fee on farming, does it still make sense to farm Aura insteald of Balancer because you have high boost (in BAL terms)? How does it change how they compete in terms of other yield geenration oeprtunties in DeFi overall? How steady is the current state and how much might this change over the next 3-6 months.

If 90% of all BPTs were in Aura I’d support raising fees, but right now I think attracting more capital to the farms as almost as important as attracting more auraBAL. A 20% increase in fees (my measure of 16-20) does not seem super prudent nore required right now.

What about just moving the vlAURA rewards as proposed, and if it’s really desired perhaps tacking an extra 0.5% onto auraBAL (making total fees 16.5%, which is more like a 3-5% increase in total fees charged)?

Maybe do more later. I’d just like to see a lot more analysis before increasing fees this much, and I don’t even think there is enough data yet to do it based on how young the protocol is.

1 Like
8

This proposal suggests a system-wide increase of 17% to 20%, so an increase of ~17.5% in the overall take.

I think a significant argument can be made that this change is marginal and can be easily outweighed by other system factors. E.g. the price of AURA has significantly climbed from launch to the point that pools are naturally earning additional yield in dollar terms since AURA is minted per BAL earned at a rate of 3.8 AURA per BAL, independent of price action.

Further, we should be making any effort possible to increase Aura’s share of veBAL. Increasing veBAL share in the long run will make depositing in Aura over Balancer directly basically irrational. As Solarcurve suggested, “vlAURA would actually make MORE money by giving up the tiny APR from protocol revenue in exchange for accelerating Aura’s accumulation of more veBAL.” By increasing Aura’s ability to boost gauges, all users, including general BPT depositors, benefit.

6 Likes
9

Supportive of this proposal and think it’s necessary to grow the overall $veBAL owned by the protocol.

With that being said, I’d like to say that I think the 120% APR for $vlAURA annualized bribes is a bit misleading. AURA emissions mean that AURA per veBAL has been consistently decreasing over time. Even with changes it is unlikely that veBAL supply increases fast enough to hold that ratio which currently sits at 1 AURA = .37 vlAURA.

I think with 4% of fees to vlAURA, the deepening liquidity of AURA/ETH proposal from Sami passing which will increase AURA specific bribes, and an overall bribe market that is growing are enough to support vlAURA.

I’d say we would just need to pivot quickly if it isn’t enough to support AURA. AURA price is what drives LP rewards and is the main reason people would farm using auraBAL. It’s a fragile flywheel that is impossible to predict future growth but I think this proposal hits the sweet spot.

1 Like
10

https://vote.aura.finance/#/proposal/0x4bfbcb9d48ecf4d000e785ee5d28d636742b91be42edf3008e765186eff2bdfa