TAP-23 - Liquidity Incentives for Aura / Balancer Gauges

Relwyn

Summary:

Establish an ongoing budget for Hidden Hand voting market incentives in order to increase OHM pair liquidity and accumulate additional strategic assets. This will be capped at $400,000 every two weeks (One HH Epoch).

Background:

TAP-15 permitted Olympus DAO to explore the use of Hidden Hand incentives as a means to boost voting power to its LP Gauges. Starting the week of March 6th, 2023, Olympus Treasury committed $100,000 USDC to its OHM/ETH Pool located on AURA as a pilot.

The results of these efforts were favorable and resulted in the pool seeing between 10-14% vAPR over the epoch.

As part of the strategic vision outlined in the recent Treasury RFC, we plan to keep the AURA and use it to increase our market share within the AURA Ecosystem. This will also be used to further vote the gauges that tactically align with our proposed policy. The other rewards will preferably be managed through OTC offers to further increase our AURA position and Balancer Gauge Weight (This is subject to a cap of 5% of veBAL Voting Power).

Proposal:

The Treasury Team requests community approval of a per epoch (Two Week) budget, not to exceed $400,000, for use in Aura/Hidden Hand/Balancer incentivized markets. This will serve as a means of efficiently increasing our $AURA and $BAL ownership over time while simultaneously receiving high emissions towards our OHM pools.

The list of potential assets used to incentivize will include:

OHM (Preferred)
USDC
DAI
FRAX

OHM utilized will either come from OHM already owned by the Treasury or minted specifically for this purpose. Proceeds will be managed to ensure the process is accretive (even in the case of new OHM entering circulating supply).

For example:

For the 3/6/23 AURA/HH Epoch, 88k net incentives yielded 1.55m votes. These votes produced approximately 137,000 incremental yield which is greater than the $88k capital spent. Therefore, this was accretive to Treasury and favorably impacted Liquid Backing.

Additionally, this is consistent with our goals of accumulating increased governance power in the Balancer ecosystem.

This budget will exist for the remainder 2023, at which time the budget will be re-evaluated for size and scope.

thomasscovell

Thanks for this team, makes lots of sense. Plenty can change between now and the end of the year though - what's the plan to track and share results from this and to alter strategy if it becomes non-accretive for a X-period?

JaLa

thomasscovell

Plan is to track on a bi weekly basis and only move forward with incentives if things remain accretive. Largely dependent on BAL/AURA price and other protocols entering the frey.

JaLa

It was an oversight from the treasury team to omit Paladin from this proposal. Due to our deep connections and stake in Redacted, Hidden Hand is preferred, but we should have flexibility to explore incentives on Paladin if it is more efficient or a desired venue for potential partners.

Figue

Hello Ohmies,

Extremely happy to see Olympus throwing down the gauntlet and vye for the top spot in the Balancer Wars. Controlling veBAL emissions will be a strong tool to keep enabling OHM as a reserve asset.

We've been helping projects do incentive campaigns on Balancer since veBAL's launch and I think there's a few points that need to be taken into account, considering Olympus' budget:

With Circle's depeg and the recent high volatility, we highly advise to use BAL insteada of USDC as the incentivizing asset; this will enable a much more qualitative tracking of how accretive the strategy is.
The budget will represent 12-45% of the total incentives for vlAURA, this means it will heavily reduce the current discount to emissions. One way to offset this effect is to create incentive campaigns reaching all layers of of veBAL.
Additionally, if you represent more than 30% of the incentives, you are basically defining the market price just by your sheer weight. A fixed incentive campaign would be more relevant in this case as it would allow Olympus to define how they want to play the game, and not the other way around (since all other platforms are market driven).
Last but not least, looking into OTC deals might also be a good way to both avoid high discount dilution for a large incentive campaign and find a favorable price. We've forked our own app to create a customized version for OTC deals called Covenant to facilitate this.

Relwyn

Figue

Hey Figue,

Cheers for the comments. I'll respond to items one and four.

Ideally, we'd like use OHM as the incentive asset but we will need to do some evaluation on take rate, profitability, etc. That will require some forensic work to follow. For now, we wanted to get the Not to Exceed proposal in front of everybody to consider.
OTC offers are also being considered and we're evaluating the landscape for people in the veBAL space and what OTC efficacy looks like.

If you want to share your project, happy to review.

Best!

Mark11

Convex gauges with a Frax eco asset like frxETH or FRAXbp seem to have a better yield structure - have you modeled this vs CVX/FXS pools? Will the program be expanded?

Relwyn

Mark11

Hey Mark!

We intend to evaluate on each ecosystem that we hold liquidity on. As Balancer was the largest and the one and we had a community commitment to regarding the TAP-15's Pilot, we we started there. As we see effective performance, we can certainly ask the community to broaden the landscape. We just want to get some sound data to review first.

As always, happy to hear strategies or approaches that are of interest to the stakeholders to feel free to shoot them over. =)