Yield Optimizer controls a third of the veBAL offer
Despite the bear market, a silent war over DeFi liquidity continues to rage on.
Curve Finance, the largest decentralized exchange (DEX) with a combined value of $5.84 billion (TVL), has been the most prominent liquidity battleground. The Curve War is being waged by DeFi protocols vying to deepen liquidity for their native tokens on Curve by locking large amounts of their CRV governance token.
The race to win the liquidity wars by controlling CRV incentives spawned another whole protocol, Convex Finance, to streamline the process. At a high level, Convex allows depositors in Curve to maximize the token rewards they receive from the DEX thanks to the massive amount of voting power Convex has accumulated.
voting lock
Convex’s voting power comes from locking CRV tokens, which the protocol encourages users to irreversibly convert to cvxCRV. Staking cvxCRV earns users what they would have earned had they banned CRV directly, but also earns a portion of the platform fees as well as Convex’s native CVX token.
It’s been a success so far – Convex’s CVX token has a market cap of $380 million as of August 23. At $4.27 billion, the protocol is also DeFi’s sixth largest in terms of total value locked (TVL), according to DeFi Llama.
Now Balancer, another automated market maker (AMM) that started as a research project in 2018, is gaining enough momentum to attract its own protocol geared towards optimizing native token rewards.
Enter Aura Finance, whose AURA token is quietly up 18.9% over the past week to $3.65. The token is also in a longer-term uptrend – it is up 157.5% in the last 60 days.
AURA price
The token was launched 75 days ago on June 9, according to Etherscan. And it’s still small — AURA has a market cap of just $37 million, which ranks 499th among all digital assets according to CoinGecko. Aura’s TVL is $316 million, making it the 33rd largest DeFi protocol.
Like most projects participating in the liquidity wars, Aura is complex.
metagovernance
“At its core, Aura is a meta-governance layer for balancers that allows all stakeholders, whether you’re an LP, governor or DAO, to optimize the direction of voting rights and therefore BAL incentives,” said Lamentations, an Aura contributor, opposite The Defiant.
Basically, Aura caters to a handful of parties – one to depositors in balancers. Users can deposit their Balancer Pool Tokens (BPTs), which represent liquidity positions, into Aura.
These positions continue to earn trading fees, but also earn an increased amount of BAL, Balancer’s token. This boost comes from the voice-guarded BAL (veBAL), which controls the allocation of BAL rewards to the various liquidity pools on the DEX. With Aura holding 29% of the current veBAL supply, the project exerts a tremendous impact on where the BAL rewards go.
Aura attracts veBAL by allowing users to exchange their BAL for auraBAL. AuraBAL, in turn, can be locked for 16 weeks, which earns the normal rewards of veBAL, but also additional AURA and BAL tokens from a performance fee that Aura charges on Liquidity Provider (LP) earnings.
Sounds complicated and it is.
Look beyond balancers
Aura doesn’t intend to just stop at Balancer. “Aura was developed agnostically to support all tokens with a ‘ve’ model, so in theory the protocol could support aggregation for other tokens,” Lamentations said.
Voting locking tokens, also known as the “ve” model, have been an ongoing DeFi narrative since January. Essentially, the model requires users to lock their tokens in order to participate in governance. Blocking usually comes with higher returns on liquidity deposits and a share of the platform’s revenue.
With Balancer, the Aura team seems to have found a good place to start collecting Ve Tokens. Trading volume on Balancer has been steady over the past year – in fact, the protocol has seen most of its days exceeding $200 million in volume since the market bottomed in May.
Aura can also have an ace up its sleeve. 0xMaki, who used to be in an executive position at Sushiswap, is working on the project. It was 0xMaki who published the original proposal to allow Aura Finance to freeze BAL tokens.
“No one can necessarily launch their own meta-governance protocol with Balancer without obtaining Balancer governance approval,” Lamentations said.
smart money
Whales are taking notice and may drive AURA’s price action. Andrew Thurman of analytics platform Nansen pointed out that AURA’s “smart money” holdings have been at all-time highs since August 22.
Nansen defines “smart money” as wallets that are very active and generally profitable.
It’s easy to believe that everyone loses money in a bear market, but AURA shows that some sectors of the market are still hot.
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