[TEMP CHECK] Safety Module - Create GHO/USDC E-CLP Category
title: [TEMP CHECK] Safety Module - Create GHO/USDC E-CLP Category author: @karpatkey_TokenLogic created: 2024-05-13
Summary
This publication proposes creating a new Safety Module (SM) category for the GHO/USDC E-CLP by Gyroscope built on Balancer v2.
Motivation
Similarly to Staked ABPT, the ability to stake GHO liquidity pool tokens improves the value proposition of the SM by providing the dual service of deep GHO liquidity and protection in the case of protocol shortfall events. Additionally, Liquidity Providers (LPs) can also benefit from earning trading fees.
The Gyroscope protocol developed a concentrated liquidity AMM called Elliptic Liquidity Pools (E-CLPs) that sits on top of Balancer. This technology achieves liquidity efficiency by providing assymetric liquidity to a specific price range based on parameters like amplification, price boundaries and peak location. More information about E-CLPs can be found here.
With GHO trading close to $1.00 and the GHO Stability Module to be funded, now is an ideal time to add a GHO LP to the SM. By adding the GHO-USDC E-CLP, it is expected to significantly improve market depth as well as USDC liquidity with the SM. Unlike other pool types on Balancer, the E-CLP requires dual asset deposits upon entering the LP.
The Aave Liquidity Committee (ALC) developed expertise on the E-CLP technology designing and incentivising one pool optimized for volume when closer to peg and another pool optimized for price volatility.
Specification
After studying various configuration of Gyroscope's E-CLPs, karpatkey_TokenLogic recommends adding the following E-CLP to Aave's SM.
Create a new GHO/USDC E-CLP SM Category with the following characteristics:
| Description | Value |
|---|---|
| Lower Bound | $0.996 |
| Upper Bound | $1.001 |
| Peak | 0.9995 |
| Amplification | 1,250 |
The following initial E-CLP SM parameter configuration is proposed optimizing emissions for a target liquidity of $5M at 20% APR:
| Description | Value |
|---|---|
| Emissions Nomination | GHO |
| Daily Emission | 2,750 |
| Slashing Rate | 50% |
| Cooldown Period | 20 days |
This proposal also recommends that GHO/USDC E-LCP is included in FastPass with the following initial parameters:
| Description | Value |
|---|---|
| FastPass Fee | 100 bps |
| Fee Destination | Collector Contract |
| Daily Withdrawal Limit | 500k |
In addition to the above, we also recommend implementing the strategy detailed in this forum post which enables the DAO via the vlAURA hodling to vote BAL and AURA rewards to this SM Category. This option then enables the Aave DAO to use is strategic assets to partially sustain the SM category.
Disclosure
TokenLogic and karpatkey receive no payment for this proposal. TokenLogic and karpatkey are both delegates within the Aave community.
Next Steps
- Gather feedback from the community and risk service providers.
- If consensus is reached on this ARFC, escalate this proposal to the Snapshot stage.
- If Snapshot outcome is YAE, escalate this proposal to AIP stage
Copyright
Copyright and related rights waived via CC0..
Off-Chain Vote
YAE
669.24K AAVE100%
NAY
1.88 AAVE0%
ABSTAIN
87.23 AAVE0%
Timeline
May 19, 2024Proposal created
May 20, 2024Proposal vote started
May 23, 2024Proposal vote ended
Dec 23, 2025Proposal updated