Aura: Aligning Incentives

A Brief Intro to Balancer

Balancer is a DEX that enables deep liquidity for LPs and traders. Participants can lock their BAL token to receive veBAL, which acts in a manner similar to Curve’s vote-escrow token model veBAL holders retain governance rights, control rewards for liquidity pools. veBAL holders also receive 75% of protocol fees. Instead of locking BAL, participants lock 80/20 BAL/ETH LP tokens to maintain deep liquidity while still locking up supply. Further, veBAL’s lock time is one year, instead of veCRV’s four year period. This is specifically to account for the rate at which the crypto industry evolves. A shorter lock time accommodates holders in the event that a new voting system is implemented.

Balancer differs from other DEXs in the sense that all tokens on the exchange are stored in one Balancer vault contract to maximize swap efficiency and gas reduction. On a traditional DEX, each trading pair has its own pool and must constantly rebalance. The vault contract separates token rebalancing and management from its pool logic while maintaining security. This architecture enables protocols to flexibly customize pool parameters to achieve specific goals. For example, the Balancer liquidity bootstrapping pool (LBP) design allows protocols to sell a single token in exchange for another with a decaying price based on time and purchases. This acts as a better token launch method than simply adding liquidity to a pool for bots to spam purchase.

Generating Aura

After seeing the success of Convex, Layer Zero and former Sushi team member 0xMaki created Aura. Aura is a yield aggregation protocol that serves Balancer in the same way Convex serves Curve.

Aura is a yield maximizer and governance hub that utilizes its 22% control of veBAL to direct BAL emissions to different pools. Users can stake auraBAL, which represents an 80/20 Balancer LP token or BAL, to receive rewards in BAL, bbaUSD, and AURA. bbaUSD is Balancer Boosted Aave USD LP share, which represents a yield bearing version of USD. AURA grants governance rights over the protocol’s veBAL and helps Balancer LPs and veBAL holders get efficient yields with minimal overhead.

Holders can lock AURA to receive platform fees and heavier voting power. Aura charges a 25% fee on all BAL revenue, where 20.5% goes to auraBAL stakers (paid in BAL) and 4% goes to AURA lockers (paid in auraBAL). Anybody can go to the revenue harvest contract, call the function and receive 0.5% of the revenue as an incentive. There is currently $25M of AURA locked, earning 4% APR before considering bribe incentives. After considering an average $0.068 per vlAURA, returns sit at ~80% APR. auraBAL stakers are currently earning 58% APR, with 33% paid in AURA, 25% in BAL, and 1% in bbaUSD.