[BIP-36] Enable TEMPLE/DAI 80/20 Gague (Ethereum)

BAL Gauges
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## Summary:

This proposal is to add a veBAL gauge for the new TEMPLE-DAI 80/20 weighted pool on Ethereum.

## References/Useful links:

Website: templedao.link

Github Page: GitHub - TempleDAO/TempleDAO

Communities: discord.gg/templedao

## Protocol Description:

TempleDAO is a low-volatility yielding token with over $52M in TVL. TempleDAO was an early backer of Frax Finance by conducting its presale exclusively in FRAX, and became a top holder with one of the largest FRAX reserves ($137M). We are one of the largest non-AMO providers of FRAX liquidity on Curve. Since March, TempleDAO has spent over $800K at Pitch.money on veFXS holder bribes to evangelize the Frax ecosystem. We hope to continue to add value for the benefit of both Temple and Balancer as we diversify into Balancer technology and our liquidity. Our inaugural Balancer pool is a weighted LP pool TEMPLE/DAI 80/20 chosen for its high farming efficiency and low risk of impermanent loss.

## Motivation:

This proposal aims to add a veBAL gauge for the TEMPLE/DAI 80/20 weighted pool. Platform BAL incentives would help deepen TEMPLE liquidity as weekly trading transaction volume on the Temple custom Uni v2 AMM has ranged between $4M to $5M for the past 30 days. The TEMPLE-FRAX gauge on Frax Finance currently has over $37M in total value locked (TVL) and we have provided close to $1mm USD value in FRAX and FXS in bribe incentives to drive liquidity into our FRAX gauge. If approved, we expect to do the same for our veBAL gauge and are in coordination with Hidden Hand to facilitate the incentivization and drive the Balancer bribe market narrative.

A Balancer LP would bring sizable TEMPLE trading volume to the Balancer platform and we plan to add more liquidity over time to maintain our share of the Balancer gauge rewards. We also plan to be active participants in Balancer governance as not only are we big fans of the technology, but also share a common vision of reducing price volatility, deep liquidity, and customizable asset exposure.

## Specifications:

Governance:

TempleDAO current team has been almost completely sourced from the community contributors. We started with a top-down nomination system for promotion and are currently in the early stages of implementing a Discord-integrated election system for promoting and demoting team members which will eventually lead to more decentralization.

Oracles:

TempleDAO does not rely on any external oracles. The intrinsic value per token used for price floor defense is coded into the contract: 0x22c2fE05f55F81Bf32310acD9a7C51c4d7b4e443. Our custom Uni v2 AMM has handled close to $300M in transaction volume since launch without any issues.

Audits:

TempleDAO contracts have been fully audited by Peckshield. We also have a generous and on-going bug bounty system at hats.finance funded with over $300K USD in $TEMPLE rewards.

Centralization vectors:

  • The token is not upgradeable nor pausable;
  • The owner has limited minting capabilities and cannot blacklist the contract;
  • The team behind the token have shown that they have never abused nor committed any actions that would affect the integrity of the builders behind TempleDAO.

Market History:

TEMPLE initiated its token presale in October of 2021 and public trading began on its own custom AMM on December 19, 2021. The $TEMPLE token price has exhibited extreme price stability for the past 5 months staying within a very narrow range above its intrinsic value price even with significant transaction volume. TempleDAO plans to use the veBAL/vlAURA voting system to boost BAL rewards for its TEMPLE LP along with TEMPLE subsidiary STAX Finance which will further drive more TVL into our LP through $STAX incentives.

## CONCLUSION

The TempleDAO Team aims to be a major adopter of Balancer technology and bribe incentivizer for BAL emissions utilizing Redacted Cartel’s Hidden Hand (“HH”) platform to help accelerate and deepen our liquidity pool. Once the 80/20 TEMPLE/DAI pool is whitelisted for BAL rewards, our bribe incentives program would begin to promote trading, bribing, LP farming activity on Balancer.

TEMPLE/DAI Weighted Pool

Gauge Address: 0x7dfadb8c3230890a81dc9593110b63bc088740d4

2 Likes
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Glad to see you all are interested in getting a gauge. My concern is around the fact that this 80/20 pool will not be the primary source of TEMPLE liquidity if I understand correctly. TEMPLE price does not fluctuate very much if coingecko is accurate - combined with the trading efficiency loss going with 80/20 instead of 50/50 and that your primary liquidity pool is elsewhere, this gauge is very unlikely to generate meaningful fee revenues. If a large amount of voting power is directed at this gauge it would allow TEMPLE holders to farm BAL with very little risk while Balancer Protocol does not benefit at all from that activity.

Have you given any thought to doing a 50/50 pool instead?

2 Likes
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Thank you for your invaluable feedback, solarcurve. It is much appreciated.

TempleDAO expects trading fees to be high on our proposed gauge for the following reasons:

  1. As part of TempleDAO’s new vault operations, we will conduct material buying on the AMM to give yield to stakers in a non-dilutive way. Should we form a strong partnership with Balancer, we would conduct this activity in the DAI/TEMPLE pool. These market operations will drive sustainable heavy transaction volume on the Balancer platform.

  2. $TEMPLE is currently trading significantly below book value per token ($1.10). If we expect price to appreciate in the near term based on DAO buying activity, we would take a significant impermanent loss on the TEMPLE we supply as liquidity if supplying at 50/50 ratio. We were also deeply impressed by the argument made by Fernando for the efficiency of the weighted pool in his Medium article, which was a decisive factor for us with respect to platform selection.

  3. If the above plays out as expected, the DAI/TEMPLE LP on Balancer will become our biggest and most active trading pair. This pool will serve as our primary liquidity pool and our largest Protocol owned liquidity asset. We are planning add $DAI to our front-end as the default option for people who choose to swap for TEMPLE on our native dApp to drive transactions. Temple’s weekly AMM transaction activity can be reviewed at: https://dune.com/queries/1051552

1 Like
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  1. Can you describe these operations? Where will the funds for this material buying come from? Why would you trade through an 80/20 pool on Balancer with presumably lower TVL + 36% trading efficiency loss when there’s $38M in a temple/frax uni-v2 pool? This all hinges on a “strong partnership” - does that mean simply approving this gauge or are more steps required to form this?

  2. TEMPLE has been trading at roughly this price since February. Why do we expect market dynamics to suddenly change? The impermanent loss efficiency gain that Fernando discusses is offset by a loss in trading efficiency. When we approve a new 80/20 gauge it starts at an immediate disadvantage because of the trading efficiency loss. This is why we must be very cautious with these imo.

  3. If you commit to migrating all TEMPLE liquidity to this pool then I can see being able to support this gauge. Is such a migration even possible though? Are there any LP positions locked as part of your protocol’s mechanics?

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I had a very nice (and long) conversation with the TempleDAO team about this gauge. To keep it brief I do think there are some unique circumstances here which could justify adding this as an 80/20.

Namely:

  • They plan to migrate protocol owned liquidity. Since the limiting factor is DAI they can scale up the TVL using an 80/20

  • They plan to run LBP’s to buy back TEMPLE which will generate trading activity

  • They plan to farm & lock BAL

  • They plan to bribe for emissions

I filled them in on future plans for core pools under BIP-19 though they require the new weighted pool factory which is still awhile away. In any event I’m comfortable enough with the proposed arrangement to vote in favor of the 80/20 if TempleDAO still feels this is their best option.

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I don’t think we need to wait for the new weighted pool factory in this case. The protocol would be earning yield fees at the bb-a-USD pool level if this was to be made an 80/20 Temple/bb-a-USD instead of temple/dai.

1 Like
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Per the TempleDAO team they’d like to proceed with this 80/20 and will consider re-evaluating in the future to take advantage of bbaUSD pairing & core pool status under BIP-19.

https://snapshot.org/#/balancer.eth/proposal/0x2f981dfc60e19d827cffdd6bcece6879abd33a0a83cf6caabfad36a99e4e179b