Remove the MIM+3Crv Pool on Convex from the collateral basket and replace it with the Balancer boosted Aave V3 composable stable pool on Aura for the hyUSD Rtoken.
Aura Finance is a protocol built on top of the Balancer system to provide maximum incentives to Balancer Liquidity Providers. The proposed proposal, if enacted, would swap out the 36.5% of the collateral basket that is occupied with the MIM+3Crv pool on Convex and replace it with the Balancer boosted Aave V3 composable stable pool on Aura.
The current basket for hyUSD contains 36.5% of the MIM+3Crv pool on Convex. The APY for this strategy has dropped significantly over the past 3 months, recently hitting a low of 4.26% APY on June 14, 2023. The Abracadabra team which is the team behind the stablecoin MIM has stated that they have no intention of boosting the APY for the MIM+3Crv pool. Currently it sits at just around 6% APY. The asset MIM has a history of depegging and is considered to be the most risky asset in the hyUSD collateral basket.
By adding the Balancer boosted Aave V3 composable stable pool on Aura to the basket in place of the MIM+3Crv pool on Convex we will achieve an overall safer underlying basket for hyUSD by omitting the asset MIM and the APY will not significantly change.
The Balancer Boosted Aave USD (symbol: bb-a-USD) is a Composable Stable Pool that facilitates swaps between three US Dollar stablecoins (USDC, USDT, and DAI) while sending idle liquidity to Aave. The underlying Linear Pools are:
- bb-a-USDC (consisting of USDC and wrapped aUSDC)
- bb-a-USDT (consisting of USDT and wrapped aUSDT)
- bb-a-DAI (consisting of DAI and wrapped aDAI)
ATokens are wrapped because they are incompatible with the Balancer Vault because they have streaming balances. These tokens must be wrapped into a static token, which accounts for any accrued value. The Balancer Pool Tokens (or BPTs) from this pool are deposited into Aura Finance for boosted rewards, yielding approximately 5.55% APY and has a TVL of 18.76 million USD.
Consideration needs to be given to gas costs when minting hyUSD with the new collateral. This will likely increase and could potentially hinder new potential minters.
Given the proposed proposal makes no change to any other collateral in the basket I believe the following changes decrease the overall risk of hyUSD. We are omitting a potentially risky asset MIM that has a history of depegging, but we are adding in a new silo of smart contracts that we haven’t seen on the Reserve Protocol before.
Instead of going down the smart contract risk path of Curve to Convex we are going down a new path of Balancer to Aura. The risk here is going down a new path, but I believe the overall risk is no more or no less risky than the Curve and Convex path. We are diversifying away from the Curve/Convex ecosystem and omitting an asset with a complex history.
- Yes, I am in favor of this proposal
- No, I am against this proposal