Balancer Angle 3EUR Pool on Mainnet

Ideas
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Curtis & Alan here (again) from the Balancer Partnerships Team. We’ve been in touch with Pablo for a long time and we would love to share some additional ideas with the community that would strengthen the relationship between Angle & Balancer.

Background on Balancer & veBAL:

Balancer is a community-driven protocol, automated portfolio manager, liquidity provider, and price sensor that empowers decentralized exchange and the automated portfolio management of tokens on the Ethereum blockchain and other EVM compatible systems.

Balancer Pools contain two or more tokens that traders can swap between. Liquidity Providers put their tokens in the pools in order to collect swap fees. Balancer’s fully flexible design space opens the aperture of possibilities for all types of liquidity providers and their respective considerations.

veBAL (vote-escrowed BAL) is a locked 80/20 BPT (Balancer Pool Token) composed of 80% BAL / 20% WETH. veBAL has a max. lock time of 1 year and can be used to direct BAL Liquidity Mining incentives on the Balancer Platform, vote on governance, and receive a portion of all protocol fees that Balancer produces.

Summary:

With the release of Circle’s EUROC it looks like the Euro Stable market on Mainnet is poised for a huge boom (on that note I did some personal research, USD stables grew in market cap at a rate 18x higher than Crypto during the bull run, and Euro Stables grew 4x higher than USD stables - insane!).

In DeFi, the 3pool (USDC/USDT/DAI) dominates most DEX’s stable liquidity pools. While both Tether and Circle have their own EURO stable models, there currently is not a go to third option for EURO stables. We believe that agEUR is uniquely positioned to become the go to third option in DeFi. Balancer, its Stable/Linear Pool Design and burgeoning veBAL wars can help play a pivotal role in that idea.

Current State of agEUR Liquidity:

Currently a large portion of agEUR liquidity on Mainnet is tied up in a Curve 3EUR vault, paired against USD stables on Uniswap or within a USD perpetual contract (source). While this is OK for where the current overall EURO stable market is, we believe that in order for agEUR to scale with the new players that have entered, an additional single point of liquidity will have to be created to allow for the deep trades that will happen .

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Proposal:

Shift ANGLE incentives towards bribing a stable pool on Balancer featuring either agEUR/EUROC/EURT or agEUR/EUROC/EURS (Or some other composition of Euro Stables to drive maximal adoption). Stable Pools feature similar math to Curve’s Pool Design and allow for very low slippage swaps between like-kind assets. The current ROI for bribe voting is returning 2.80x-5.80x (source), meaning just $10k in bribes returns $30-60k in liquidity mining rewards per week. Posting such high APR on stable pools has shown a positive correlation with growing TVL in the pool, which would subsequently draw additional eyes and users to the Angle platform.

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Completing this and focusing on liquidity concentration + attraction of pool users could be a very effective way for Angle to seize the narrative and position itself as the “DAI” of the EURO 3pool of tomorrow.

I look forward to hearing your feedback/comments and chatting more about this proposal!

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Thanks for the excellent proposal! I do agree that there shouldn’t be any single point of liquidity for a stablecoin like agEUR, and as such building liquidity on other exchanges including blue chip ones like Balancer is essential!

Yet I don’t think this should be done at the expense of our Curve strategy more in parallel. Curve remains a central place for stablecoin exchanges and we need to maintain agEUR presence there, especially it’s going to be highly strategic for us to have a base pool.

That being said: I personally welcome any pool of liquidity on any exchange including agEUR. In terms of players to include, it makes sense to include Euro of course, I do feel however that we’ve helped EURs and EURt too much with our incentives on Curve and it would make sense to include projects which could match with similar incentives like CELO.

As such making a pool with cEUR and EUROc could definitely be a way for us. We’d have to see later how to calibrate the incentives, and if any, but starting to test out such pools on Balancer seems like a no brainer.

As for bribes, we’ve seen with Curve that it was something super useful but still a costly and in this sense I believe we should take more time to evaluate doing this and the scale at which we do it

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Great and I 100% agree, involving more partners who want a similar outcome is very smart for Angle. The more ways you can split the pie the better when it comes to costs. As for bribing it is expensive, however the expenses can usually be offset with any amount of Protocol Owned Liquidity. A prime example of this is Badger. They deployed ~$2M of liquidity to the BADGER/WBTC pool on Balancer, then $20k of bribes. From that $20k in bribes/week they were able to extract 10x profits in BAL (which they subsequently used to lock as auraBAL and are now farming there). They now have sustainable LM rewards for very little long term cost to the Badger Protocol and can turn a profit anytime they choose.

So while bribes are expensive in the short term, long term I see them as a way for protocols to get low cost LM/liquidity.

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Yes true, the FRAX example is also telling in that regard

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Thanks for the proposal @curtis !

Personally, I see Balancer’s main specificity are pools with different balances, like 80/20 or 90/10. However I’m not very familiar with their trade-offs in terms of IL or slippage, both for volatile tokens and stablecoins.

Do you think having a stablecoin like agEUR in an 80/20 pool be better in some ways?

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Hey @tuta , thanks for the response!

So that is one of our specialties but we’ve also released a few additional features (including but not limited to - StablePools, MetaStablePools, Liquidity Bootstrapping Pools, Managed Pools, Boosted Pools and Custom Pools).

For this specific proposal I was thinking of a Stable Pool (Similar to Curve’s Math, low price impact/slippage/etc.) but another interesting idea for when we are able to deploy more Boosted Pools could be for an Aave/Euler Boosted EURO Pool featuring agEUR. Boosted Pools essentially take a portion of the LP and deposit it to Aave/Euler/X Lending Market to farm while funds are idle. This is particularly impactful during periods where trading activity might be low. Our Aave Boosted Stable Pool has seen some pretty significant deposits.

The main benefit to an 80/20 is the 80% weight allows for significantly less IL during volatile events and upside during bull markets. The downside to them is they can be hit more by price impact when they are on the smaller size and if the trade amount is large. However this is largely offset with larger pool sizes, as this issue does not effect Balancer’s own 80/20 Pool (80% BAL/20% ETH).

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Nikhil here from the Celo Foundation. We’re very interested in this proposal with cEUR and are currently engaging with Angle and the Balancer Partnerships Team. Look forward to further collaboration and working together on this to create a Euro pool

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