0xMaki Interview: Getting to Know Aura Finance, the Newest Member of the Balancer Ecosystem
Author Joey Wong is a member of Balancer DAO. This is not financial advice.
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0xMaki x Joey Wong
Today we are delighted to have a special interview with the legendary figure and old friend 0xMaki, as the community members of Balancer raised many questions about his latest project Aura Finance. Let's explore the significance of Aura for Balancer together.
JW: How did the idea of Aura Finance come about?
0xMaki: I have always wanted to collaborate with 0xMaha because he is possibly one of the most talented Solidity engineers I have encountered, especially when we saw how the ve-token model was going to dominate.
I knew Convex would focus only on CRV because the vast majority of tokens are used for liquidity mining activities. We decided to provide a similar product for Balancer and offer it to more protocols in the future, updating over 1000 lines of code to improve gas efficiency and adding support for erc4626.
JW: Why do we need Aura?
0xMaki: Under the current mechanism, smaller BAL holders cannot sustainably lock their veBAL automatically to compete with other whales. We provide them with a simple way to earn protocol revenue while still retaining BAL rewards and increasing LP returns. In contrast to only receiving BAL tokens, they will also receive Aura.
JW: How is Aura different from other similar protocols like Convex?
0xMaki: We will focus on protocols beyond Convex, making it complementary rather than competitive. That is why we decided to airdrop to outstanding participants such as CVX lockers, veBAL holders, and LobsterDAO NFT holders (DeFi OG). In addition to what I have mentioned before, the protocol's construction is designed to initiate on-chain governance within a few months after launch. We did not raise any funds but chose to launch a fair LBP auction to guide our initially locked auraBAL and recover audit costs. The team consists of long-time professional and trustworthy community members. We will try to expand to other chains via LayerZero to provide a low-cost reward claiming path and a simple LP method for smaller users by the end of the year.
JW: What is your vision for DeFi and DAO? Will Aura build a DAO around its product? Any hints?
0xMaki: Decentralization is a crucial part of DeFi and DAO, ensuring that there are no barriers for any participant, regardless of their country, gender, wealth, or religion. From day one, Aura will be a DAO, just like I have contributed to Sushi and Stargate. I believe the best scenario for fostering an active DAO is to allow anyone interested in participating in the adventure to make as many contributions as possible without hindrance.
JW: The launch of the Aura project is in a bear market. How can you ensure the project and team smoothly transition to the next cycle in such a situation?
0xMaki: We are very fortunate to have excellent partners from many other DAOs who are willing to collaborate, and the Balancer community is very excited to participate in this new adventure. The current market is the best time for preparation and construction, without any hype or frenzy. The goal is to quietly accumulate BAL and let metrics, improvements, and the community speak for our work.
What is Aura Finance?
Aura Finance is a protocol built on the Balancer system, providing maximum incentives for Balancer liquidity providers and BAL stakers by depositing BAL and Aura native tokens.
Weaknesses of veBAL
The ve mechanism is undoubtedly a successful model in DeFi. However, it has weaknesses, such as the inability to transfer veBAL itself. Although the veBAL lockup limit is one year and has been boosted to a maximum of 2.5 times, shorter than the 4 years of other protocols, it lacks flexibility, causing some BAL holders to hesitate. Currently, only about half of the circulating BAL is locked in veBAL.
Another issue is that voting rights and Boost belong to the same wallet address, meaning an address needs to provide liquidity and have a sufficient amount of BAL to maximize the value of BAL and periodically relock to achieve the maximum boost of 2.5 times. The intersection of these two conditions reduces the attractiveness of BAL.
This led to the birth of Aura Finance.
How does Aura work?
Users can deposit BAL/ETH 80/20 BPT into Aura to receive auraBAL, which is transferable unlike veBAL.
Thus, auraBAL is tokenized circulating veBAL and can be traded on Balancer.
Users staking auraBAL can receive protocol fees in the form of BAL and bbaUSD, as well as Aura performance fees in BAL and the platform token Aura.
In addition to staking auraBAL, users can provide liquidity to the auraBAL/[80/20 BAL/ETH BPT] pool on Balancer and stake to earn Aura rewards.
By converting BAL into auraBAL, it separates voting rights from profit rights. Profit rights belong to auraBAL stakers, while voting rights belong to AURA locked in vlAURA.
In summary, for those not interested in governance but prefer to simply collect protocol fees, they can choose to stake auraBAL; for those interested in governance, including BAL reward distribution, they can lock AURA.
This solves the aforementioned veBAL mechanism shortcomings.
Currently, only 20% of the circulating supply is locked in veBAL, or 7% of the total supply, indicating significant potential for AURA development. Considering the veBAL lockup is 80/20 BAL/ETH BPT, the more locked, the deeper the pool, the better the liquidity, and consequently, the more stable the token price.
Why is the composition of Aura holders important to Balancer?
Considering that CRV is locked in Convex nearly 50%, suggesting that Curve's governance is under Convex's control, having an agent aligned with Balancer's interests is crucial. Therefore, the composition of Aura holders has a significant impact on Balancer's governance.
First, the Aura airdrop is primarily distributed to addresses that have shown commitment to DeFi protocols before.2.5% is distributed to the Balancer, Convex Finance, and LobsterDAO communities. 2% is allocated to Balancer treasury. 1% is reserved for future airdrops.
Additionally, 50% will be rewarded proportionally to users who stake Balancer LP tokens or auraBAL on Aura.
10% goes to auraBAL/[80/20 BAL/ETH BPT LP token] pool liquidity providers.
2% is for AURA LBP.
Team allocation accounts for only 10%, and 17.5% goes to the community treasury.
From the above, Aura without VCs allocates most AURA tokens to long-term supporters of the Balancer protocol, aligning well with Balancer's long-term interests.
AURA's LBP Liquidity Bootstrapping Pool Data
- Start date: June 9th, 18:00 UTC
- Auction duration: 5 days
- Website: https://app.aura.finance/#/lbp
- Initial pool tokens: 2.2 million AURA and 100 ETH
- Initial weight: 99/1 AURA/ETH
- Ending weight: 25/75 AURA/ETH if ETH price remains above $1400 during the auction
- If ETH price falls below $1400, weight changes to 25/75 AURA/ETH after 72 hours.
- Total AURA supply: 100 million
- Pool transaction fee: 2%
Important note: Extreme weight changes close to 99/1 can lead to significant price fluctuations, so be cautious.
Special mention: 2% of the total AURA supply will be directly distributed to auraBAL stakers in the first two weeks of the protocol (including those who choose to lock AURA airdrops). Those choosing to claim will incur a 30% penalty. Full lockup receives the full amount.
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Special thanks to Xeonus, Zekraken, Markus for providing relevant data for this articlehttps://mirror.xyz/0xfEE0Bbe31345a7c27368534fEf45a57133FF3A86/Y4YsfSqL9FloMrfNvxKTBqrmvAiU1p_CS1DaZHeCREw