Summary
This proposal seeks to withdraw ~$250k of DAO-owned liquidity currently sitting idle in six Balancer v3 ERC4626 liquidity buffers on Ethereum mainnet, and transfer those proceeds to the Innovation Fund multisig at 0x284a37B375e69c8cB30a5633Ee55f3584dd26808, established under BIP-818.
Buffers were sized when mainnet gas was expensive. The economics that justify holding this much idle capital no longer tracks, the Innovation Fund has proven to be useful for testing new products with partners such as AutoRange. The mandate, controls, and reporting obligations established in BIP-818 stay the same.
Right-sizing the buffers frees $250,331, leaving $90,000 in place across the six buffers — enough to continue absorbing the overwhelming majority of routed trade flow based on the average trade size observed over the past few months.
Background: why buffers were funded, and why they are now oversized
Liquidity buffers are an internal Vault mechanism holding paired ERC4626 wrapped tokens and their underlying assets (e.g. waEthUSDC / USDC). When a swap routes through a boosted pool, the Vault can source the wrapped token from the buffer instead of calling deposit/withdraw on the underlying lending protocol. This avoids the wrap/unwrap round trip and materially reduces gas.
Critically, buffers earn nothing. As the docs state plainly, there is no intrinsic economic benefit to being a buffer LP: no swap fees, no yield participation versus simply holding, and no LM system connection. Buffer capital is a pure subsidy the DAO pays to make trades cheaper for users. It is only worth paying while the gas saved is large relative to the capital tied up.
Two things have changed since these buffers were funded:
-
Mainnet gas has fallen dramatically. The wrap/unwrap fallback that buffers exist to avoid now costs a small fraction of what it did when these buffers were sized. The absolute dollar value of the subsidy has collapsed.
-
A buffer with insufficient liquidity still works. Trades never fail for lack of buffer depth — the Vault simply wraps or unwraps on demand and rebalances itself. Under-sizing a buffer degrades gas cost at the margin; it does not degrade correctness, routing, or availability.
Sizing methodology
Rather than emptying the buffers, we propose to right-size them. For each buffer we identified the major pairs that actually route through it, took the average trade size across the most recent 1M blocks, and applied a multiplier reflecting how much headroom that buffer needs before it has to touch the wrap/unwrap process.
Use of funds
The mandate is unchanged from BIP-818. These funds support:
-
New business opportunities, where deploying DAO liquidity unlocks a partnership or integration that would otherwise stall waiting for external LPs.
-
Research and production testing of new pool types, continuing the work that has already produced oracle StableSurge pools, the MEV priority tax hook, AutoRange (ReCLAMM), and dynamic fee control pools. Testing in production with real capital has repeatedly proven far more efficient than emitting incentives and hoping external LPs show up to bear the risk premium on untested technology.
-
Increasing protocol revenue by seeding pools with high capital utilization — AutoRange pools in particular — where a given dollar of liquidity generates substantially more fee revenue than in a conventional weighted or stable pool.
Setup
The fund continues to be managed by the multisig at 0x284a37B375e69c8cB30a5633Ee55f3584dd26808. The current signer set is:
- danko 0x122AFb4667C5f80e45721a42C7c81e9140C62FA4
- gosuto 0x11761c7b08287d9489CD84C04DF6852F5C07107b
- xeonus 0x7019Be4E4eB74cA5F61224FeAf687d2b43998516
- fabio 0x90347b9CC81a4a28aAc74E8B134040d5ce2eaB6D
- zekraken 0xafFC70b81D54F229A5F50ec07e2c76D2AAAD07Ae
- marcus 0xb7364Fca20EEC90f51b158C05199044AD362b675
Should mainnet gas conditions change materially, or should a future boosted pool deployment warrant deeper buffer support, buffer liquidity can be topped up again via a subsequent proposal. Nothing here is irreversible.
Specification
Buffer shares are non-transferable and can only be removed by the account that deposited them. Accordingly, the depositor multisig 0x0efccbb9e2c09ea29551879bd9da32362b32fc89 will call removeLiquidityFromBuffer on the Balancer v3 Vault (0xbA1333333333a1BA1108E8412f11850A5C319bA9) on Ethereum mainnet for each of the following wrapped tokens, removing the share amounts below:
Because buffer exits are strictly proportional, each removal returns a mix of the wrapped token and its underlying asset in the buffer’s current proportions. The resulting balances — both wrapped and underlying — will then be transferred to the Innovation Fund multisig at 0x284a37B375e69c8cB30a5633Ee55f3584dd26808 on Ethereum mainnet.