[RFC] Create ARB/AURA/BAL Liquidity on Arbitrum

Temperature Check
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Authors: Json, Lamentations, & the Aura Maxis (Aura Finance contributors), with support from Balancer Maxis

Motivation:
A number of Aura Finance contributors are currently working on developing cross-chain instances of Aura, starting with Arbitrum. These instances, should they be approved by governance, are being made possible by Balancer’s Layer 0 compatible gauge development. Based on community conversations, it has become clear that there will be a demand for AURA liquidity on Layer 2 should Aura launch there. We would like to propose to the Balancer community to form a bi-partisan liquidity pool seeding of AURA, ARB, and BAL.

As part of the Arbitrum token launch Balancer DAO was allocated ~3M ARB tokens. Recently, Balancer Maxis have proposed using a portion of this allocation for liquidity on Arbitrum. We would like to propose to the community to create an ARB/AURA/BAL pool. The exact weights of the pool will be determined by the community.

Should Aura launch on other chains, it may bring substantial growth to Balancer on Arbitrum and other major Ethereum scaling solutions. Specifically on Arbitrum, Aura contributors have identified substantial interest from protocols interested in seeding liquidity, furthering the growth of liquidity that is already there, and building on top of Aura/Balancer infrastructure. To amplify the rate of growth, Aura could apply for Grant and or Ecosystem funding from networks, to then be leveraged to co-incentivize market participants.

Upon community approval, Balancer DAO and Aura DAO will deposit liquidity into a contract that will hold the liquidity pool. The creation of this pool will unlock the ability for Arbitrum users to trade AURA on Arbitrum and increase protocol integration potential.

Specification:
An escrow contract will be created that allows the BPT position to be managed jointly by both Balancer DAO and Aura DAO. The operation and implementation of this escrow will be similar to the veBal grant escrow that was deployed for the timeless grant. This escrow will have the following functionality;

  1. Ability to create a BPT position in a 33:33:33 or 40:30:30 or other community-proposed weighting ARB:BAL:AURA pool
  2. Ability to deposit the BPT position into Aura, if a Balancer gauge is active for the pool
  3. Reinvesting BAL and AURA the position earns back into the BPT
  4. Ability to increase the BPT size by either party
  5. Ability to halt and redeem the grant
  6. Ability to unwind the BPT position back into the constituent tokens

Ability to send ARB and BAL back to Balancer and AURA back to Aura. AURA liquidity will be provided by Aura Finance, and BAL and ARB liquidity by Balancer.

Redemption Specification:
Upon community approval, either party can request to deprecate their respective portion of the LP. Following the request, the multisig from either party would execute the contract function to remove their respective share of liquidity. A window of 60 days will begin upon execution which allows for the party to remove liquidity. Failure to execute within the 60-day window will result in the necessity to re-execute the contract for the ability to remove the liquidity.

Ask
Community to provide input on whether or not to move forward with the creation of the liquidity pool, what should the % weights of tokens be, and what should the fee be on the pool.

6 Likes
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nice proposal!

We’re all excited to go hard on Arbitrum but that will be difficult without decent BAL & AURA liquidity for folks to sell farm rewards into. It’s not ideal to have to spend emissions incentivizing this liquidity. It’s also not ideal to put stablecoin treasury assets in the LP as that puts operational funds at risk in the scenario of a large market decline.

Thus using Balancer’s ARB to pair with is a great alternative we’re lucky to have. Aura can piggy back on this initiative with Balancer and everyone wins. BAL & AURA liquidity is secured for no cost (emissions) and we get free TVL/volume/fees.

There will be a pool created like ARB/WETH or similar for easy routing between BAL & AURA and other tokens on Balancer. I don’t see a need to create a gauge for ARB/BAL/AURA LP - better to direct our emissions on Arbitrum to pools that will be more efficient on an emissions per TVL/fee basis. Our treasuries don’t really need more BAL & AURA either :slight_smile:

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This seems like a great proposal and a cool way to deepen the partnership between Aura, Balancer and Arbitrum.

A few comments/questions:

Is there really a need to farm BAL/AURA and sell some for ARB with the treasury. This seems to just dilute rewards for stakers. I would prefer if the treasury/this contract did not stake BPTs and hence there should be no BAL or AURA.

Do you mean the ability for each DAO to withdraw the tokens they put in?

It would be easier to manage if we could vote on a single pool mixture and stick to it.

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Aligned here. The RFC just states the ability for such functions but does not necessitate the creation of a gauge for the LP. The proposal’s purpose is mainly for the formation of the LP and any proposal that wants to create a gauge for it must be a separate post.

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  1. Addressed it in my previous answer and will change the wording for final post.
  2. Yes.
  3. We’re pushing to the community to provide input on what is the best weighting for the pool.
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In our view, the current proposal is beneficial for both the Aura and Balancer protocols. It will help expand both protocols’ impact on Arbitrum, one of the most important Layer 2 solutions to Ethereum.
In particular, the liquidity shared by two DAOs would help the trading experience of both BAL and AURA tokens on Arbitrum. It is also crucial for onboarding integrators and new partners for both Aura and Balancer Protocols on Arbitrum.

For the specifics, the Aura Maxis recommend

  1. a weighted pool 40:30:30 (ARB:BAL:AURA), which achieves a good compromise between trading efficiency and commitment from both DAOs;
  2. a dynamic swap fee, initially set at 0.25%, and controlled by the multisig for potential future adjustment;
  3. not requesting gauge for the pool as it is largely protocol-owned liquidity, at least initially. This might change in the future if the community shows interest in a gauge.
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looks like ARB will be on Aave v3 fairly soon

we could do Aave boosted ARB in this pool potentially. I’m thinking the other pool will be Aave boosted ARB/[wstETH/bbaweth BPT].

Course this means we take Aave v3 risk with our POL which must be considered.

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Hope aave would incentivize the ARB market, would make the pool even better.

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It seems to me that if as DAO we are trying to grow large Aave boosted pools, it perhaps makes sense to eat our own dog food.

With the desired size of these pools, it’s not like the POL makes a good backstop/insurance fund against losses anyway.