[BIP-368] Allocate Incentives towards Avalanche Launch

Governance General Proposal
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PR with Payload

Introduction

Balancer contributors are working towards a likely Avalanche launch at the end of July or early August in accordance with BIP-206. The purpose of this RFC is to explore the possibility of Balancer allocating funds from the treasury towards incentives in the post launch period. My initial recommendation is to allocate 100k USDC from the Treasury towards 12 weeks of incentives, to be matched 1:1 on a USD basis by Ava Labs. Balancer Maxis and Ava Labs might decide to make changes to the allocation during the program based on conversations with partners. This is an RFC so everything is up for discussion.

Why Incentivize Avalanche

Avalanche already has an established ecosystem with Aave v3 as the top protocol by TVL and several LSTā€™s (sAVAX by BenQi, ankrAVAX, yyAVAX by Yield Yak, ggAVAX by GoGoPool), with sAVAX having nearly $100M TVL. This is a significant benefit because these are strong yield sources we can tap into. With optimized stable pools and enough starting incentives we can establish Balancer as the main LST and USDT<>USDC trading venue. Longer term our primary goals will be to source ve8020 integrations and encourage the growth of additional LST integrations - projects like Pendle and Raft plus Aave v3 listings for example.

BenQi, Ankr, Yield Yak, and GoGo Pool have all signaled their interest in offering liquidity incentives with additional conversations ongoing. Combined with the launch incentives from this proposal Iā€™m confident we can quickly get into a position of strength that would set us up for long term success - and very likely see this investment fully repaid within a year.

By the Numbers

Balancer contributors are still working with Ava Labs to finalize exact allocations and it is likely during the course of the 12 week distribution changes will be made based on partner conversations. A conservative estimate based on a likely set of pools yields the following numbers:

  • TVL - $26.7M
  • Annualized Revenue - $578k
  • Number of weeks to repay treasury at current fee split: 12.85

Conclusion

I imagine many are hesitant to spend treasury funds on incentives which is completely understandable. All things considered, I believe there are strong reasons in favor of doing this - we can supercharge the nascent LST economy on Avalanche and hit the ground running with a lot of momentum. Thereā€™s solid 3rd party interest and these partners will see very strong ROIā€™s if we execute this incentives plan. That sets them up for success and gives Balancer a good chance to see strong sustained protocol fee growth.

Specification

If approved, the DAO Multisig on ethereum eth:0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will transfer 100,000 USDC to the Maxi LM Multisig eth:0xc38c5f97B34E175FFd35407fc91a937300E33860. From there it will be bridged to Avalanche and distributed.

2 Likes
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https://snapshot.org/#/balancer.eth/proposal/0x627c89289a3f29b4de9fa3479657a0a884590d6d705460fca5ca77de88409491

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Solar, can you plz provide the maths behind these estimates? Payback in 12 weeks makes sense for the DAO from a risk appetite perspective but just curious on how you got there.

Thanks very much

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Ava Labs prefers not to publicly disclose the launch pools yet, thatā€™s why I canā€™t present a more complete spreadsheet. it is extrapolated based on a conservative estimate of pool TVLā€™s and the revenue weā€™d earn on that TVL. pool TVL is determined by what % of the 200k incentives itā€™s getting per week using a reward APR from a comparable pool somewhere else.