Maybe I am missing something and you could elaborate on the additional benefits you see beyond fees a pool generates.
So here are two main points that I would like to bring up.
One is why I think that graviAURA is a value-adding asset to the ecosystem in general - and why the fees are not the only factor. And another is why I don’t think that all 80/20 pools should be treated equally and should be considered on a case-by-case basis by the Balancer and AURA governance.
- The graviAURA value add to the Balancer + AURA ecosystem
This is recognizing that trading efficiency is lost when using an 80/20 pool and we need to ensure all gauges can benefit the protocol (earn fees).
I don’t view trading efficiency as the pinnacle of the Balancer ecosystem. One of the main opportunities that the tech provides is to create these 80/20 types of pools that by design are not efficient for trading, but they compensate for that with the reduced price impact exposure for LPs.
And graviAURA paired pools if done right would make that feature a strength, not a weakness or an attack vector.
So, first, let’s start with an example that is rather neutral and in my view checks all the boxes for being a value-adding pool for the ecosystem, a WBTC/ETH/graviAURA pool - or a bb-a-USDT/DAI/USDC / graviAURA pool.
The usual pools in influence token ecosystems have a flaw in how the incentives are aligned among different participants, being LPs, lockers, and vote influencers/bribers. And we can see how the whole game theory of this interaction has played out in the Curve + Convex ecosystem.
That ecosystem design allows for:
- Mercenary liquidity (LPs who farm & dump the tokens that other parties have voted for - and the amount is multitudes higher than the fees that the lockers get)
- Mercenary voting (lockers who vote to get the maximum amount of bribes that they dump)
- Mercenary bribing (not really a possibility now on Convex, but it would be if there was a bribing ecosystem on Solidly, for example)
Among the three, mercenary bribing is the least threat as long as voters have the power to un-whitelist the gauge that is considered unhealthy for the ecosystem.
Mercenary voting can arguably be viewed as the main driving force of the CVX token value, since bribes serve as the main source of yield for vlCVX - and thus the demand to lock.
And there is no solution at all to the mercenary liquidity - especially as a Convex-type yield aggregator emerges, which in a way brings it back to square one Sushi 1.0 liquidity mining, where the LPs can extract value from the ecosystem while paying multitudes less in fees back to the lockers.
The way the Convex ecosystem has been playing out for the last six months or so has been:
- LPs are the clear winners
- Lockers exchange the ecosystem tokens close to 1:1 for the bribes
- Bribers/vote influencers are the main “suckers” who at the end of the day pay for LPs being the clear winners.
I’d like to emphasize that the yield influencers (these are not only the bribers but also actors who want to accumulate the yield influence tokens to direct the token emissions to a specific pool) add the most monetary value to the ecosystem here.
What Balancer tech together with the graviAURA self-voting pools allow to emerge is a potential solution to the incentives misalignment issue.
If an LP by default is exposed to the asset that votes for the pool, the opportunity to make anything mercenary is severely dimmed. On top of it, there is no bribing/voting inefficiency, so instead of three actors, there’s one. The one actor who also provides liquidity to the ecosystem token and is able to capture the full value of that ecosystem token while having direct exposure to it as a trade-off.
In my mind, this is how you create a healthy and sustainable ecosystem that doesn’t just come down to the emissions vs fees ratio that plays its half-life out until the liquidity is not interested anymore.
So the main point I’d like to make here is that graviAURA has a shot at making the Balancer + AURA ecosystem a more competitive actor in the DEX space - by having this unique option to tackle the mercenary liquidity issue and create sustainable liquidity.
And sustainable liquidity isn’t something that only the DEX (or the lockers) is interested in. It has a legitimate demand that isn’t served in the current DeFi environment.
For example, one of the ideas for graviAURA (which is still a wip, hence not shared publicly yet) is to direct a part of the voting fee to bootstrap the new pools of the new graviAURA pairs to get into the ecosystem.
So if you are a DAO X, all you would have to do is to create an XToken/ETH/graviAURA type of vault, have it approved by the Balancer and AURA governance, and then graviAURA would bootstrap the pool for you, and as a result, you would get some level of sustainable liquidity that comes from the self-voting feature of the pool.
So it would be a tool to grow the overall ecosystem and align the new entrants with its growth, since they would be exposed to graviAURA themselves.
This also brings me to my second point being:
- Not all 80/20 pools are equal.
As fees are not the only variable in the equation, it matters whether the specific pool is considered healthy for the ecosystem regardless of the fees it earns.
And this is where Balancer and AURA governance should shine, and potentially to an extent the BadgerDAO governance as the third layer, which shouldn’t really be needed.
For example, if someone would create a 95/5 graviAURA/ETH pool and applied for the gauge, that wouldn’t be healthy for the ecosystem and wouldn’t be likely to be approved by the gauge vote, since that would be a minimally useful blackhole of token emissions of the protocol.
Side note, I also don’t think that 50/50 xToken/graviAURA types of pools are a great idea either, even though they would pass the “no 80/20 pools” checkbox.
If an 80/20 pool is being used as a way for one single party to get the majority share of the votes in the protocol - that wouldn’t be healthy too, since it would compromise the decentralized nature of the protocol, which generally leads to a negative-sum game for all the parties involved.
I won’t dive into the Badger vault product since we’ve decided to postpone that discussion until we have something more cohesive to present and discuss.
But 80/20 pools could still be useful for a lot of other things, like governance tokens built on top of it, for example.
And it doesn’t matter in this case whether the token has more capital-efficient liquidity outside of it.
It still adds value and aligns the ecosystems.
For example, imagine DAO Y that decides to use a governance model akin to Balancer, and have Ytoken/graviAURA 80/20 as the governance token that gets locked.
Would it add value to Balancer and AURA? And if it would, would it still be an issue if that Y token had other liquidity sources that provided more liquidity depth?
Then imagine the scenario where demand for that governance token shoots up, which by extent means that more people are buying graviAURA and locking its liquidity, which is a proxy of AURA liquidity, which has a somewhat direct relation with BAL.
Would it still be a net positive thing for Balancer, or would it not, even if we assume that somehow the Ytoken has zero trading volume in the Ytoken/graviAURA pool?