[BIP-579] Enable Gauge for pxETH/WETH [Ethereum]

PR with Payload

Summary

  • This is a proposal to enable one uncapped Balancer gauge for pxETH/WETH on Arbitrum.
  • The underlying pool is an Elliptic Concentrated Liquidity Pool (E-CLP). E-CLPs are custom pools from Gyroscope built on top of Balancer’s pool architecture. They enable trading along the curve of an ellipse. This pool type is ideally suited for stablecoins and liquid staking tokens; it is typically more capital efficient and could thus generate significant trading volume.
  • The pool shall has a swap fee of 4 basis points, i.e., 0.04% at pool inception. The fee split is as follows: 50% of all collected fees will go to liquidity providers, while the remaining 50% will go towards Balancer. At pool inception, no fees will go towards Gyroscope.

References/Useful links

Protocol Description:

pxETH is a liquid and fungible receipt token for ETH deposited into the Dinero protocol. pxETH is built on top of the Redacted DAO’s Pirex platform and forms an integral part of Redacted’s Dinero protocol, a protocol which aims to vertically integrate ETH staking, block proposal and building, a RPC, leverage, and yield stripping into one synergistic ecosystem comprising pxETH, the Redacted Relayer RPC, and the DINERO stablecoin. pxETH provides users with a liquid and fungible tokenized staked ETH which benefits from Ethereum staking rewards and other revenue forms such as MEV tips and block rewards. Future pxETH yield and pxETH withdrawals can be tokenized and used within DeFi. Further details about pxETH can be found in the whitepaper here .

In addition to the DEX liquidity for pxETH incentivized by Redacted DAO, the Dinero protocol has additional mechanisms to improve pxETH liquidity and support the pxETH:ETH peg in both normal and adverse market conditions allowing for greater pxETH DeFi composability.

pxETH can be redeemed for ETH from the Dinero protocol either instantaneously for ETH which has yet to be staked or via ETH which is unstaked from validators. In the future a novel incentivized withdrawal pool will facilitate quicker pxETH withdrawals when there is an ETH unstaking queue and/or adverse market conditions.

The governance token for pxETH is BTRFLY.

Motivation:

Redacted has a long and close relationship with Balancer and Aura. Because of this close relationship and Redacted’s vlAURA governance power, we want to have Balancer as the one of our primary venues for crucial pxETH liquidity.

An LST is only as good as its peg. Therefore for pxETH to be successful, significant liquidity is required. With a gauge, Redacted plans to use its governance power and bribes to direct emissions to the gauge and incentivize crucial pxETH liquidity on Balancer, allowing for higher volumes in the LP and also generating fees for veBAL holders.

By using E-CLPs a comparably small amount of initial capital can provide a disproportionately deep market for GYD. The E-CLP’s efficiency gains are possible due to:

  • Customizable liquidity profiles: Using the curve of an ellipse enables highly customizable liquidity profiles. E-CLPs can be calibrated to approximate most trading curves that would be desired. E-CLP curves can be tailored to have certain regions of low price impact and other regions of high price impact.
  • Price bounds: The E-CLP concentrates liquidity within price-bounds that enable the E-CLP to be highly capital-efficient. Functionally, this works by enabling arbitrary truncation of liquidity profiles from a given trading curve. In effect, the capital efficiency comes from bounding the trading curve to an expected trading range of the assets.

Several E-CLPs have already been deployed to provide custom tailored liquidity profiles for LSTs and stablecoins. For an overview of previously deployed E-CLPs consult: https://dune.com/gyro_finance/gyroscope-e-clps 1

Specifications

Governance

The Gyroscope Protocol will be governed by a DAO and relevant stakeholder with the full launch on Ethereum. For now, the FTL Labs multi-sig can pause the pool, change the swap fee and set the protocol fee. As a custom pool by Gyroscope, the E-CLP will be controlled by Gyroscope governance upon its launch.

Oracles

No oracles are currently used.

Audits

Audit reports by Nethermind, Trail of Bits, and Runtime Verification can be accessed here (the E-CLP is called the “CEMM” in these reports). In addition, the E-CLP code has been live in production on Polygon since November 2022.

Centralization vectors

No centralization vectors. The FTL Labs team’s multi-sig can - currently - pause the pool, change the swap fee and set the protocol fee.

Market History

The Gyroscope Protocol is live on Ethereum since EOY23, with E-CLPs on several other chains. Details available here 1 .

Value

As per “Motivation”.

Contracts

Technical Specification:

The Balancer Maxi LM Multisig eth:0xc38c5f97B34E175FFd35407fc91a937300E33860 will interact with the GaugeAdderv4 at 0x5DbAd78818D4c8958EfF2d5b95b28385A22113Cd and call the addGauge function with the following arguments:

gauge(address): 0x924ABE88022F9422a2938aE0741Fc2C769E85934

gaugeType(string): Ethereum

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https://snapshot.org/#/balancer.eth/proposal/0x0f9da99eac0cb6ea2b552949c03db8c6b17f2f2e40de406fe60dadaac0db18a9

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