Authors: 0xSami (Redacted Cartel)
Aura currently has a liquidity crisis, with not enough coins deposited in decentralized exchanges for trading, disallowing DAOs, whales, and the general DeFi population from entering the ecosystem without considerable price impact. To both bootstrap this bribing ecosystem and to deepen liquidity, Aura should allocate coins from the treasury, left over from the LBP allocation, to incentivize the new 50/50 AURA/ETH gauge.
As laid out by SmallCap and Tritium in a recent temperature check to increase the liquid AURA float, AURA is facing a liquidity crisis.
With only ~1,000,000 AURA of the 2,500,000 AURA earmarked for airdrop recipients claimed, ~4,100,000 AURA locked, and a large tranche of AURA in the 80/20 AURA/ETH pool on Balancer, there is little AURA left circulating. And there remains a large tranche of liquid AURA of ~1,300,000 tokens held by the treasury, meant for liquidity that are not being used as liquidity or locked.
The new 50/50 AURA/ETH pool has improved liquidity conditions, though the token’s depth does not yet match that of other top protocols. Per ParaSwap, purchasing $50,000 worth of AURA will cause a 1.9% price impact. This is considerably higher than the price impact for $50,000 orders for top coins like CRV (0.15%), MKR (0.14%), AAVE (0.7%), YFI (0.6%), to name just a few examples.
Bootstrapping Incentive Ecosystem
As seen with Convex and Votium, “ve” (vote-escrowed) metagovernance protocols can benefit from a thriving incentive ecosystem that sees DAOs compete for liquidity, emissions, and thus benefits like more trading fees or less price slippage to end users. Aura partnered with Redacted’s Hidden Hand protocol to launch a market for vlAURA holders.
Aura’s bribing ecosystem is currently nascent, with only a few players such as DFX, Stader, Lido, and FiatDAO. There is an opportunity to bootstrap an extremely competitive bribing market since vlAURA efficiency remains high, and will benefit both vlAURA holders and Redacted stakeholders well into the future as Aura becomes a heavily incentivized marketplace.
Driving returns to vlAURA holders
Aura core contributor Butterfield [posted] a temperature check to boost the protocol fee directed at auraBAL stakers at the slight expense of vlAURA holders. A thriving vlAURA bribing market would mitigate the redirected rewards that Butterfield’s proposal would cause should it pass.
An easy way to address these three challenges is the DAO bribing the 50/50 AURA/ETH gauge via Hidden Hand, as SmallCap and Tritium first suggested in the aforementioned temperature check. This will also likely drive further growth in Aura adoption by potentially increasing protocol yields across the board. This proposal, should it pass, will:
- Redirect 30,000 AURA per vlAURA epoch for a year (totaling 780,000 AURA) to a new smaller operational multisig from the treasury, consisting of an Aura core contributor, Tritium, and Solarcurve. The multisig will operate on a 2/3 basis.
- The AURA will be sent in four batches of 180,000 tokens every three months to minimize operational security risk.
- The split between bribing between the veBAL and vlAURA markets will be decided at the multisig’s discretion, optimizing for incentive efficiency and returns for vlAURA holders.
The effect this proposal has on AURA liquidity and adoption should be monitored and potentially adjusted by future governance proposals should the need arise.
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 redirecting AURA from the treasury for incentives in accordance with the specification set out in this proposal.