EDIT 2023.04.19 - Revised from 600k GEAR/epoch to 1m GEAR/epoch.
Allocate 1m GEAR ($14k at current prices) per 2-week epoch to bribe vlAura holders (via HiddenHand) to vote for the Balancer Boosted Gearbox USD Pool for the purpose of evaluating efficiency relative to directly rewarding GEAR to lenders on Gearbox, and to simultaneously raise awareness for Gearbox and the lending pools to the Aura and Balancer communities.
If desired by multisig, multisig to coordinate with Aura on sending multiple installments to reduce burden (ie, send 1 month of GEAR and Aura will custody the GEAR and bribe the appropriate amount each epoch). Alternatively, the multisig can conduct bi-weekly operations directly via HiddenHand.
Balancer’s boosted pool system allows a portion of a liquidity pool to be deployed in yield bearing strategies, without sacrificing depth of the liquidity pool. This allows LPers to earn additional yield on their position while still allowing large swaps through the pool. An initial pool has been created for USDC, DAI, dUSDC, and dDAI. This means traders can swap USDC and DAI in the pool, while LPers earn yield from lending USDC and DAI to Gearbox on a portion of their liquidity position.
The pool earns yield in the form of swap fees, base yield (USDC, DAI), external rewards (GEAR), and internal rewards (AURA, BAL). A portion of the yield is passed on to the LPer, a portion goes to the DAO treasury/veBAL, and another portion is used to bribe voters to vote for the pool (essentially this means LPers get a little extra yield, but in the form of AURA/BAL instead of GEAR).
An initial group of vlAura holders voted for the Gearbox USD pool. This created initial rewards in BAL/AURA, which brought TVL, which brings APR that goes to LPers/bribes, etc. There is a potential flywheel here, where an ‘altruistic’ baseline of voters will create baseline incentives, which brings TVL, which brings APR, which brings more TVL, etc, etc. A key piece of this flywheel is the Aura bribe multiplier which is historically between 1 and 1.5 ($1 paid to aura voters will send between $1.5 and $2 of emissions to the pool).
However, the initial vote has ended - so a new altruistic voter would need to step in to continue to grow the pool. Or, perhaps a voter that is already spending GEAR for diesel pools - aka, Gearbox.
The primary question here is: If we spend GEAR to bribe vlAura voters to vote for this pool, do we actually get more dUSDC and dDAI liquidity than if we send GEAR to the lenders directly?. The answer is: MAYBE. Essentially there are a LOT of assumptions and variables, but in general most conditions lead to it being somewhere between slightly worse and a bit better (see below section for more information).
So - the goal of this proposal is to fill in the void in voting, in order to see if the pool grows as we expect it to over time. The purpose would be to re-evaluate in the future to determine if a more significant portion of lending pool liquidity mining would make sense to divert to this pool. Additionally, the presence of a stablecoin pool with reasonable yield can bring new eyes to Gearbox and the lending pools from the Aura/Bal communities (which should encapsulate a decent chunk of active DeFi yield farmers/lenders).
A boosted pool begins with a linear pool. This is a pool that pairs a yield bearing asset with it’s underlying collateral. For example, yvWETH and WETH. The pool has a target weighting that can be compared to the actual pool balance onchain with expected price functions of the yield bearing asset. When a pool user helps restore the pool balance closer to the target, they receive a credit. When they push it further off balance, they pay a fee. The bigger a pool, the higher % of yield bearing asset it can hold as the target balance is a flat number (not a percentage).
The linear pool token can then be paired with another asset to create a boosted pool. For example, a yvWETH/WETH linear pool could be paired with GEAR to create a GEAR/(yvWETH/WETH) market where a specified percentage of WETH (based on the linear pool balance) is deployed in Yearn.
We would be looking at creating and utilizing base pairings with Gearbox’s diesel lending pools (dWETH, dUSDC, etc). This spreadsheet has been created to model two potential use cases:
- Comparing sending GEAR rewards to the gearbox DAI and USDC lending pools with instead bribing the Gearbox boosted pool
- Comparing liquidity mining GEAR/WETH on Curve v2 with a potential GEAR/(wETH/dWETH) pool on balancer
The spreadsheet takes inputs from the current GEARBOX pools and compares them to bribing vlAura voters. There are a few highly impactful variables here such as the vote multiplier, the assumed APR that LPers will demand (because the protocol does not set the APR - the LPers decide that, the protocol just dictates total rewards), and pool size. The purpose is to determine which approach represents a net savings in spendings on both liquidity mining programs. These variables are highly… .well… variable… and therefore it is difficult to draw a meaningful conclusion. The spreadsheet also details and incorporates the exact breakdown of fee share in boosted pools.
Note the GEAR/WETH comparison does not yet include the option to bribe the curve pool. However, because the altruistic anon votes for the curve pool seem to have dried up, this scenario should also be considered if considering changes to GEAR/WETH liquidity mining.
It would be fair to ask “this bribe multiplier thing seems too good to be true, who tf loses in this case?”. Ultimately I think bribes/liquidity mining/etc are all a manifestation of P/E ratios. You can give $1 of profit to an LPer every year, or you can give that same LPer a token that entitles them to $1 of profit this year, and a bit less every year after that assuming the protocol doesn’t grow and they keep getting diluted by giving out new tokens. In the investing world, most investments are valued at some Price/Earnings ratio greater than 1. That means the token promising ~$1/year is almost always valued by the market as worth more than $1. As long as that is true, it will always be better to distribute tokens instead of direct revenue to incentivize protocol use. Granted, the game is different in DeFi as many tokens do not distribute revenue and instead only offer governance - but despite that, many tokens still trade at a P/E ratio far greater than 1 (if not a negative number because earnings are negative). TL;DR as long as the investing world is pricing in growth, bribes gud for bootstrapping/sourcing liquidity where imbalanced.
For reference: current GEAR/WETH LM program = $50k/month or $25k/ 2 weeks
Current GEAR Supply Lend Program: 275m tokens over 1 year = 23m/month or $343k/month, $170k/ 2 weeks
Voting is simple FOR, AGAINST, ABSTAIN.