Angle ve80/20 proposal
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.
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.
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