PGM-27: Treasury Management #3.2

Paladin Governance Management (PGM) PGM - Approved
1

Summary: Update the BAL strategy

Context: As mentioned in Treasury management #2, most BAL & CRV holdings have been transferred to the Locked Tokens Multisig, with other strategic assets, and CRV strategy update is discussed on PGM-XX: Treasury Management #3.1.

While the CVX & AURA have been locked already to avoid missing another round (considering that there are not a lot of possible strategies for these assets), some of the BAL & CRV are already deployed but there might be better strategies.

Rationale: The current BAL holdings are the following:


Breakdown of the 1.86k BAL:

  • 1634,38 BAL held on the Locked tokens multisig
  • 30,34 BAL + 198 BAL pending claim from Aura on the main multisig

One of the long term goals is to get the ability to max lock for veBAL, allowing to benefit from all veBAL features without additional restriction: Governance power, gauge weight power, veBoost, protocol fees and any potential airdrop to veBAL holders.

However, we need to be whitelisted to lock BPT-80BAL-20WETH, and this can take time, so the DAO started by using wrappers and might continue before asking the veBAL whitelist directly, depending on the result of this proposal. .

After PGP 17, the Paladin DAO deposited 2832,4 BAL single assets on Balancer to receive 1091,4 BPT swapped for 1103.14 auraBAL deposited on Union for 1101,38 uAuraBAL temporarily, which allowed the DAO to autocompound auraBAL earnings.

Breakdown of uAuraBAL earnings:
Deposit balance vs current auraBAL balance: 1103,14 → 1306,33 = 203,19 auraBAL

uAuraBAL voting power:
None. As the treasury bought auraBAL, the voting power and veBoost are traded for more yield, which prevents from voting on Quests & earning bribes.
Even if the auraBAL APR is currently higher than the veBAL one and with an automated management, it’s mostly because of the auraBAL migration recently, so APR should decrease soon.

auraBAL current APR:

  • 30.5% paid in AURA
  • 27.3% paid in BAL from all BAL captured by AURA
  • 0.2% paid in bb-a-USD from protocol fees

veBAL current APR:

  • Gauge weight power: 27-35% APR in bribes
  • 1.35% in protocol fees paid in BAL & bb-a-USD
  • Governance power (Not priced)
  • veBoost (Not priced yet, and could be delegated and used by Paladin DAO)

Several options to optimize the BAL holdings:

1) Update to auraBAL Strategy: Exit Union but keep accumulating some BAL, AURA & stables with the auraBAL holdings, until it’s big enough to lock on veBAL. In that case, the Locked tokens msig signers would compound BAL in auraBAL, lock all AURA in vlAURA and sell all bb-a-USD in WETH.

vlAURA would be used to vote on Paladin Quests to earn bribes, either by voting on Paladin pools, or on other pools to earn various tokens in bribes that could be sold for WETH to diversify the treasury and prepare the veBAL migration.

Estimated yield for auraBAL & vlAURA strategies:

948×156 10.4 KB

*These calculations don’t take auto compounding into account.

While it’s relatively limited as the liquidity is 12.2M$, there is still a risk that auraBAL can depeg if whales decide to massively sell some on the market to exit their positions.

2) Migrate to veBAL strategy (if whitelisted):
Switch from (u)auraBAL to veBAL as soon as possible: In that case, the proposal would be published soon on Balancer governance. To simplify, the idea is to add the 20% equivalent in WETH and LP before locking. Several assets on the main Msig & on the fee collector that can be sold to reach 2 ETH.

veBAL future position:

At this point, Paladin would control 0,0193% of the veBAL voting supply & weekly emission + 0,0353% of the vlAURA supply.

BAL LM emission controlled weekly (based on 2023 emission)

  • 2230 veBAL owned: Emission redirected = 23.48 BAL/Week
  • 959.29 veBAL managed with 3969 vlAURA: Emission redirected = 5.05 BAL/Week
    Total BAL that could be redirected by Warlord: 28.53 BAL/Week

**Estimated yield for veBAL & vlAURA strategies:

949×154 10.1 KB

*These calculations don’t take auto compounding into account.

Both veBAL (once migrated) & vlAURA would be used to vote on Paladin Quests to earn bribes, either by voting on Paladin pools, or on other pools to earn various tokens in bribes that would be sold for WETH to diversify the treasury and prepare the veBAL migration.

3) Keep the uAuraBAL strategy:
Despite the set & forget strategy auto compounding the auraBAL rewards on Union, this is not the best for the following reasons:

  • Accumulating more auraBAL which has no voting power
  • Not synergistic with Quest & Warden (No votes/bribes & no veBoost)
  • Risk of auraBAL depeg
  • 5 of performance fee + 1% withdraw fee

Means: 2 ETH to buy using Quest fees (if veBAL)

Technical implementation:

  • Claim pending BAL on the Main Multisig and send to locked tokens Msig
  • Start working on the Balancer whitelist proposal

Then,

  • If the auraBAL strategy is voted: Withdraw from Union and migrate all BAL for auraBAL
  • If the veBAL Strategy is voted: Withdraw from Union, manually compound BAL earned for auraBAL until whitelist, lock aura rewards for vlAURA, sell all bb-a-USD for WETH and publish the whitelist proposal
  • If the Union strategy is voted: Add all BAL for auraBAL, then deposit aurBAL for uauraBAL

Voting Options:

  • Update to auraBAL strategy
  • Migrate to veBAL strategy if whitelisted
  • Keep the uAuraBAL strategy
  • Explore other strategies
  • Abstain
Which strategy for BAL holdings ?
  • Update to auraBAL strategy
  • Migrate to veBAL strategy if whitelisted
  • Keep the uAuraBAL strategy
  • Explore other strategies
  • Abstain

0 voters

2

Given the withdrawal fees with uAuraBAL (1%) its, imo, more interesting to stay in AuraBAL directly on Aura (but in this case we take the depeg risk) or to wait for the whitelist

It will depend on how long it takes to get the whitelist

1 Like
3

Not sure how long it will take either.
Imo we should publish the BAL wl proposal asap, move to auraBAL until it’s voted so at least we can vote with AURA rewards in vlAURA and farm more, then migrate to veBAL once whitelisted (by this time the auraBAL APR should have decreased anyway)

1 Like
4

I’m in favor of going with the auraBAL strategy for the moment (with a stronger surveillance of the asset’s peg) to continue accruing BAL & AURA and consolidate our position.
But I’m against trying to get he Whitelist for the current Locker Multisig, because having the tokens locked in this Multisig for a long period (here 1 year max to always have full voting power) will block us from sending those BAL to the Sister DAO when the initiative will be launched (update to come soon), and forcing us to wait the decay for that lock, losing voting power over time to unlock the tokens and send them to the subDAO (making it less efficient in term of controlled voting power).
For that reason, I’m more in favor of going with the auraBAL strategy for now, and prepare the demand for a Whitelist when the subDAO will be launched instead.

4 Likes
5

That’s right, I had totally forgotten about this sisterDAO thing haha

So yes 100% for the auraBAL strategy and keep an eye on the peg

6

This one is less straight-forward than with CRV.
The uAuraBAL strategy is extremely cool but doesn’t fit our current needs. Balancer Quest needs access to more voting power if we want to keep growing. I agree with @Kogaroshi that a WL would not be relevant for the time being which means that our options are:

  • Either swapping our auraBAL for sdBAL (and have the same problems than with our sdCRV + Union exit fee + auraBAL slippage).
  • staking auraBAL (59% APR)
  • provide auraBAL/80-20BALETH liq. (60%)

The last two options will help us accumulate Aura, which seem like a positive alternative since we can lock & vote with it immediately.

1 Like
7

This discussion seems pretty clear, auraBAL sounds like the best option for our needs atm.

2 Likes
8

I’d argue we haven’t had the conversation for acquiring Tetu instead.
The problem with auraBAL is that it is illiquid and might stay this way for some time, which will hinder our goals since what we currently need on Balancer is votes.

My thought is the following:

  • Buy Tetu with our BAL when the price is is lower than the underlying $/vote (taking dilution of the extra lock pressure we create into account) with a max of 50M% of our acquired BAL;
  • Buy Aura with our BAL when the price is is lower than the underlying $/vote (taking dilution of the extra lock pressure we create into account) with a max of 50M% of our acquired BAL;
  • Remove uAuraBAL from Union and stake to start farming AURA
2 Likes
9

Agree on this, from my calculations 1$ of veTETU controls 3.4$ of veBAL, and 1$ of vlAURA controls 2.2$ of veBAL, and while AURA is illiquid (~11M liquidity), TETU is even more (~3.2M liquidity), so splitting the unallocated BAL between both to optimize voting power seems the best option to avoid being all in on 1 protocol.

When I looked at veTETU, I noticed that the tetuBAL-BAL is farming at 115% APR, which is more than twice the auraBAL one (52% APR)
If we’re considering to start a strategy with veTETU, farming some can be quite interesting too, especially considering that we can merge/split locks if needed.

In this case we could leave 50% of the auraBAL farming on AURA and more 50% to tetuBAL.
Also since it’s on Polygon, if voted we’ll need to create a Polygon Multisig, and bridge BAL to buy TETU and potentially tetuBAL

1 Like
10

Ok so let’s recap the proposal and put it to vote folks!

  • Stay in uAuraBAL
  • Exit uAuraBAL and farm AURA
  • Sell half uAuraBAL over time (to avoid slippage) and lock in tetuBAL
  • Lock BAL in locker
  • Swap BAL for AURA
  • Swap BAL for Tetu
  • Swap 50% of BAL for Aura and 50% for Tetu if they have a higher $/vote than veBAL
1 Like
11

Vote is now live: Snapshot

1 Like
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Quorum for PGM-27: 473484 hPAL votes

image

(Ps: Small typo on the last snapshot option, ofc it’s DCA swap from BAL to both 50% AURA & 50% TETU, it’s written properly in the TLDR)

13

Not a typo, snapshot votes are limited to 32 characters =/ but yes, ty for precision