Weekly Gauge #56 : Metrics & News

Scaling Matters

Recent shifts in vote incentive markets have captured attention. This article highlights key insights from the vlCVX and vlAura ecosystems, including current marketplaces flaws and how to overcome them. In a second part, we will summarize the development of the [ARFC] Enhancing Aave DAO's Liquidity Incentive Strategy on Balancer to quantify the implications for Aura.

1. Recap on state of vote incentive markets  

Over the last 60 days, equivalent to 4 liquid lockers voting round, we have observed a continuous decline in vote incentives volume for the vlCVX token, from $1.36M to $981k a total decrease of around 28%, interestingly this correspond to the increase in incentive creators’ APR which grew from negative 21% to positive 8%. Fortunately, the voters APR didn’t suffer from this volatility and still sits around 20%.

While Curve didn’t make it to the Arbitrum Grants cut-off with only 60,901,414 votes for, the 

community shouldn’t forget that once the Optimism Grant KYC issue fixed the project will unlock 500,000 OP as well as 5M ARB from the first airdrop for additional emissions rewards.

On the vlAura side, still over the last 4 rounds, we can observe the same relationship between volume and bribers APR, with inverse trends, here the voters APR displays clearer directional trends than for vlCVX.

Balancer and other Aura ecosystem projects such as Jones DAO managed to gather enough votes to validate their grant proposal, cumulating over 3M ARB token that will be mostly redistributed to these platforms’ users via emissions top up.

The correlation between the volatility of incentive volumes and the creators’ APR is becoming increasingly challenging to manage for the biggest marketplaces, this highlights a flaw in scalability and was carefully analyzed by Paladin team to build Quest V2.

Quest V2 will allow voters and bribers to coordinate at a whole new level and reach a way more efficient equilibrium, by introducing an exclusive set of features including multiple rollover options, Fixed & Ranged incentives, and more analytics ressources than ever for both users sides.

2. AAVE safety module proposal 

The original forum post, authored by Dydymoon, presents a proposal to update the Balancer ecosystem holdings of the Aave DAO by acquiring AURA tokens to optimize voting power over emissions. This proposal is the result of several months of work and simulations to improve the AAVE safety module cover, mainly by introducing new yield bearing strategies increasing stkAAVE APR while decreasing AAVE emissions. Two primary options are suggested, one involving converting BPT to AURA and the other advocating for retaining BPT and acquiring AURA with stables. 

Further, a revised Option 3 is proposed by Karpatkey, emphasizing minting auraBAL in classic staking, using BAL and USDC/AAVE rewards for bribes, and acquiring $800K worth of AURA through a combination of market purchases, a token swap, and an OTC deal with the Aura Ecosystem Fund.

The subsequent forum discussion includes feedback from many community members, offering insights into the technical considerations, strategic investments, and risk premiums. Finally, MarcZeller from the ACI closed the topic with plans for executing the proposal and a reference to the now validated version of Option 3 by Karpatkey.

Overall, the forum discussion highlights the complexity of balancing asset holdings for optimal emissions, the importance of adhering to governance rules, and the need for collaborative decision-making within the Aave community. 

In degen terms, that’s:

•  $400,000 of upcoming buying pressure on Aura’s DEX liquidity

• A projected increase of vlAURA supply by 1,392,955 units or 6.5% 

• Minting of 157,169 new AuraBAL, allowing the project to reach 42.7% dominance over veBAL governance power.

This news should positively impact the Aura brand and community, since the long lasting and principal Balancer partner, AAVE, is now actively engaging on and leveraging the product suite offered by Aura. 

OTC deals and token swap between DeFi projects have already proven to be very effective to bring back sustainable and meaningful buying pressure, e.g Pendle Finance, and it is highly likely that Aura token will benefit a lot from this proposal to snowball and eat the dip it is currently digging.