PR with Payload
Summary
In this proposal, we seek to provide protocol owned liquidity to a 80BAL-20WETH:WETH 50:50 weighted pool on Ethereum. By providing this liquidity, we intend to improve pricing of the 80BAL-20WETH BPT and its dependent tokens like sdBAL and auraBAL while also utilizing otherwise idle BAL liquidity for the DAO.
Motivation
veBAL is based on the locked 80BAL-20WETH balancer pool token (BPT). Many secondary locked versions of veBAL like sdBAL and auraBAL directly depend on pricing of said BPT as they are paired with this token (e.g. 80BAL-20WETH:auraBAL Composable stable pool). One main issue is that there is no consistent pricing available for the 80BAL-20WETH BPT. By seeding a 80BAL-20WETH:WETH weighted pool, we can guarantee that more accurate pricing for the BPT can occur. As a result, many dependent tokens like auraBAL and sdBAL will benefit from optimized pricing. Finally, this provides an opportunity to utilize idle BAL and generate revenue as this pool will likely result in increased trading activity.
An example of price discrepancy issues is clearly visible on the price chart on Geckoterminal for the 80BAL-20WETH:auraBAL pool on mainnet. Note the price divergence on even small swaps in February
Source GeckoTerminal
Beethoven-X utilized a fBeets:USDC pool in the past to solve a similar problem. They were able to collect significant trading fees while also improving overall pricing of their assets, showcasing that such an approach has beneficial implications on the 8020-BPT. Beethoven-X DAO later removed POL based on the maBEETs token locking redesign. In the case of Balancer DAO, a pool matched with USDC would not result in the best outcome.
Therefore, the usage of a BAL8020:WETH pool would guarantee better trading routes with aggregators, assuming they have a correct setting for hop limits implemented (>=3). A potential route could then be WETH → 80BAL-20WETH (via new pool) → auraBAL(2 hops) without the need to perform a join / wrap for the aggregator. Another example would be USDC → WETH (via USDC:WETH pool) → 80BAL-20WETH → auraBAL (3 hops)
Execution Specification
To achieve better price stability, we intend to provide liquidity in a 80BAL-20WETH:WETH 50:50 weighted pool initially set at 1% dynamic swap fees with a POL target of $100,000 USD.
Given a BAL price of $1.82and WETH price of $2,454 we are requesting following amounts:
BAL: $40k / $1.82 = 21978 (50% * 80% = 40% of the $100k)
WETH: $60k / $2454 = 24.45 ((50% * 20%) + 50% = 60% of the $100k)
Derived from first composing a $50k 80BAL-20WETH position, which is then matched with $50k of WETH tokens as seen in this table:
| 50% | 50% | |
|---|---|---|
| 80BAL-20WETH | ||
| BAL | WETH | WETH |
| 21978 | 4.075 | 20.375 |
Risks
Given the structure of the pool design and amount of liquidity requested, there should be minimal impermanent loss occurring as these assets are highly correlated. The only risk being identified is wrong configuration of the payloads which can be mitigated by careful review and execution only after secondary and third party reviews.
Technical Specification
The Balancer DAO multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will interact with BAL 0xba100000625a3754423978a60c9317c58a424e3d by writing transfer passing the LM Multisig on Mainnet 0xc38c5f97B34E175FFd35407fc91a937300E33860 as recipient and amount 21978 BAL as 219780000000000000000000000. Furthermore, the Balancer DAO multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will interact with WETH 0xc02aaa39b223fe8d0a0e5c4f27ead9083c756cc2 by writing transfer passing the LM Multisig on Mainnet 0xc38c5f97B34E175FFd35407fc91a937300E33860 as dst and amount 24.45 as 2445000000000000000000
Afterwards, the LM multisig will first deposit 21978 BAL and 4.075 WETH in the 80BAL:20WETH pool. Afterwards, the 80BAL-20WETH BPT will be matched with 20.375 WETH in the 80BAL-20WETH:WETH 50:50 pool
Upon successful deposit of funds, the LM multi-sig will transfer the resulting BPT token to the Balancer DAO Multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f completing the seeding process.