Consider veANGLE 80/20 model

Ideas
1

Angle ve80/20 proposal :rocket:

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

Summary:

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.

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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.

Locking liquidity vs. locking single-sided token has some cool advantages:

  • Guaranteed long-term and sustainable liquidity for the ANGLE token at no additional cost to the protocol. Locking pure ANGLE would have the opposite effect of shrinking liquidity. 80/20 Pools have been shown to be the go-to solution for Governance Tokens, as they provide ~50% less IL and significantly higher upside for users who are bullish on that platform’s token.

  • The pool could be the main source of ANGLE liquidity, so with a higher fee, the protocol can generate a lot of revenues from swap fees only. The pool owner (Angle DAO) can set dynamic fees so that it can increase them in times of high volatility and decrease it when the market is calmer.

  • Users have some exposure to agEUR (20%) so it gives them some hedge. However, since the pool has 80% ANGLE it has a lot less impermanent loss than a 50/50 pool would like the one you currently have on Sushi (3M USD TVL).

  • Angle can create a gauge for its 80/20 pool to allow it to receive BAL emissions. It is highly profitable to bribe veBAL holders as we have seen with Lido, and QiDAO among others. As shown by the below graphic (from this Dune Dashboard), bribes are shown to be 3-6x more cost-efficient at providing Liquidity Mining incentives for any pool.

  • Another thing worth highlighting about the 80/20 mechanism is that the price of ANGLE has a lower boundary relative to agEUR because for ANGLE to go down relative to agEUR, the pool has to absorb ANGLE from the market. Because of this effect, the more ANGLE is locked in the pool; the less the price can drop relative to agEUR.

Several Convex Style platforms have already launched on top of the veBAL platform - Those include Aura, Stake DAO, Tetu, and Pickle. The 0xMaki-led Aura is currently in the lead with ~890k veBAL ($11M) locked, with the other protocols slated to launch in the coming months.

Protocols or Users looking to direct incentives to their pools can also bribe vlAURA and veBAL holders to vote for their pool on Hidden Hand. Current ROI on Hidden Hand is very lucrative for DAO’s with Protocol Owned Liquidity. As of writing this document, the average protocol returned $2.80-$5.80 of Emissions per $1 of bribe money spent.

Looking forward to hearing your comments, fam :hut:

2 Likes
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Thanks for putting this together Alan!

On my end, I believe that this is an opportunity to explore, yet the migration cost is quite costly at the moment for the upside.

People paid the gas cost to become Sushiswap LPs and then stake in our gauge, having them unstake from the gauge and re-stake in a new gauge (+ potentially changing their gauge votes) is something which is non-negligible.

As for the bribe, from a tactical perspective it makes sense and can be considered, but from our Curve experience bribes are what’s worth for the price action of a token (even though there can be a cool upside).

Anyway, interesting idea for me, but not sure this is something doable at the moment with the recent price action of the ANGLE token and the fact that we’re trying to cut emissions

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Thanks for the quick response @sogipec! I understand not wanting to migrate SLP liquidity, especially when tokens have already been locked and gauges voted for. We may have a solution for your first point but I will come back to that at a later date.

In the meantime, this could effectively help cut your emissions to maintain ANGLE liquidity. When ANGLE/agEUR is locked as a veTOKEN then you would technically no longer need to continually emit tokens to maintain that liquidity, it is then self sufficient as the liquidity is locked as a BPT to perform governance actions/gauge votes. You can see this on Balancer where we are providing minimal emissions to our primary source of BAL liquidity due to veBAL being a locked 80/20 BPT (80% BAL/20% ETH).

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As can be seen we are paying just 2.68% of our weekly emissions to maintain ~$72MM of BAL liquidity. However even if no emissions existed, that liquidity would still remain as it’s locked either permanently via Aura/Convex Forks or for a year in veBAL.

As for bribing I think that could be seen as a secondary objective outside of creating sustainable liquidity. However could be a way for Angle to lock itself into sustainable LM rewards in the future.

1 Like
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Yes locking LP tokens for ve-tokens is something which is super smart I must admit. Unfortunately migrating our ve system to something like that is rather complex

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Thank you for the proposal @Alan !

I think locking 80/20 ANGLE/agEUR BP tokens to get veANGLE would be a very good idea in general. The fact of generating additional revenu from fees + locking liquidity is great.

However, in our case I think it would require some work, and the migration cost would be significant. I also don’t think it’s the priority for the protocol at the moment.

  1. Ideally we should have a contract allowing to lock ANGLE with any agToken into veANGLE, requiring some changes (probably no that complicated though)
  2. Migrating to a new veANGLE model doesn’t strike me as the protocol priority at the moment. If it were, I think it would be best to take the time to think through the current veToken model, and see how it can be improved. I believe it’s not ideal at all yet, and better models could be designed.

But hopefully, the ANGLE tokenomics will be improved at some point to better align token holders and the protocol interest.

When the time comes, locking some form of BPT tokens would definitely be an option to look into
!

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