Authors: 0xButterfield (Aura)
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.
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:
- Balancer system fees in bb-a-USD and BAL
- A percentage of all BAL earned on Aura
- 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.
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
Change the fee rates to the following:
- 15.5% auraBAL (+10%)
- 4% vlAURA (-7%)
- 0.5% Harvest (no change)
- => 20% total (+3%)
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.