EGP-9

Title: Onboard bb-a-USD Authors: @Max | FIAT DAO Type: Executable Proposal Status: Draft Date proposed: July 28th, 2022 Date ratified:

References

1. bb-a-USD Pool
2. Balancer Boosted Pool Documentation
3. Yearn Vault Strategy
4. Aura Finance Documentation

Sentence Summary

This proposal calls for the addition of a Yearn Finance strategy that auto-compounds deposits of the bb-a-USD Balancer Finance pool via Aura Finance as a supported yield originator.

Paragraph Summary

Balancer Finance allows for the rehypothecation of liquidity provider assets into yield-bearing strategies via its Asset Manager functionality. Its flagship proof of concept is the Aave-boosted pool, which deploys USDC, DAI, and USDT into Aave in accordance with its trading volumes. This allows for higher yields and reduces the opportunity cost present in underutilized stableswap pools. In parallel to this development, not only has Balancer Finance implemented its veBAL system, but Aura Finance has also committed to subsidizing governance-favored Balancer pools. This means that bb-a-USD LPs can receive i) trading fees, ii) rehypothecation yields, iii) $BAL emissions, and iv) $AURA emissions. Accordingly, Yearn Finance has developed a strategy capable of a) depositing bb-a-USD Balancer Pool Tokens into Aura Finance, and b) auto-compounding the position as it earns $BAL and $AURA. This strategy is expected to be finalized by mid-August and stands to be added to the Yearn Finance frontend pending a governance vote.

Motivation

bb-a-USD represents the second largest pool on Balancer Finance with $130M in TVL at the time of writing. It typically deploys between 80 and 85% of its liquidity into AAVE, implying a blended 0.74% yield with current lending rates. Factoring in both $BAL and $AURA emissions, this comes out to ~6% APR prior to any auto-compounding executed by Yearn Finance. As an originator, it presents a compelling combination of organic yield as well as consistent governance token emissions.

Furthermore, we at FIAT DAO see a clear win-win-win opportunity for ourselves, Element Finance, and Balancer Finance should bb-a-USD come to be supported. We would look to add support for yvBlpbb-a-USD principal tokens as collateral for minting $FIAT, which has liquidity primarily on Balancer Finance via our “FUD” pool. Users would be able to leverage their exposure to the bb-a-USD pool, resulting in locked TVL for both Balancer and Aura. If that strategy proves popular, we believe Balancer and Aura governance would have an incentive to subsidize $FIAT liquidity in order to increase the strategy’s capacity. The end state of such a scenario playing out would be:

• Recurring TVL for Element
• Deep secondary liquidity for $FIAT
• Locked TVL for Balancer, Aura

Specification

Element Finance currently supports multiple Yearn Finance vault strategies as yield originators. In speaking with Yearn Finance contributors, the production-ready version of the bb-a-USD vault is expected to be deployed in mid-August. Moreover, bb-a-USD itself will be undergoing a migration to a patched contract imminently. For users interested in learning more, please refer to the following:

• Preliminary Auto-Compounding Strategy
• Most Recent Update on bb-a-USD Migration
• Aura Finance Audit by Halborn Next Steps

1. Discuss concerns or questions regarding bb-a-USD and the Yearn strategy
2. Conduct a snapshot poll to approve yvBlpbb-a-USD vault as an originator
3. Confirm finalization of both vault and successful migration of bb-a-USD
4. Deploy Element Finance pool for yvBlpbb-a-USD with an initial maturity date set for March 23rd, 2023 4