[BIP-571] Enable SWEEP/USDC gauge [Arbitrum]

This is a proposal on behalf of Sweep Protocol to enable one 2% Balancer gauge for SWEEP/USDC on Arbitrum.

The underlying pool is a metastable pool with a central rate that moves as SWEEP pays interest by moving a target price.

The pool has a swap fee of 1 basis point. Balancer earns a fee of 50% of the interest earnings - the increase in rate - on the SWEEP side of the pool.

References/Useful links

Website: https://sweepr.finance Documentation: https://docs.sweepr.finance Github: https://github.com/SweeprFi/sweepr-contracts Blog: https://medium.com/Sweepr

Protocol Description

Sweep Protocol provides a yield-bearing dollar coin. It is designed as a simple and embeddable asset for DeFi pools and wallets. It can replace zero-interest USD coins in AMM pools. It earns yield with collateralized lending in DeFi and CeFi.

LIABILITIES Borrowers mint SWEEP coins as a liability. The protocol charges interest by moving USD target price for repayment. SWEEP is sold and redeemed in AMMs, such as a Balancer stable pool on Arbitrum. The SWEEP coin moves through LayerZero and AMM arbitrage to link multiple chains in a single money market.

ASSETS Sweep funds collateralized lending through vaults called Stabilizers. Stabilizers have standard parameters for equity (also known as margin collateral or junior tranche), call terms, and fees. They have customized code to invest, divest, and price the assets they contain.

Sweep stabilizers support a wide range of collateral

DeFi strategies. With distribution to multiple chains, Sweep protocol has the tools seek the best risk-adjusted rewards in the blockchain ecosystem

Tokenized securities. They provide qualified borrowers, and they can allow up to seven days to settle a trade

Commercial loans with collateral agents that represent the lending pool

The protocol promises to be able to return all assets within seven days. Over time the protocol should be able to provide longer-duration, more useful money.

DECENTRALIZATION The protocol can decentralize by pushing responsibilities to borrowers. Each stabilizer vault is controlled by a single borrower. The borrower is responsible for providing junior tranche capital, qualifying to buy securities or other assets, making allocations, and harvesting rewards. Sweep gives users a simple process to design a new asset Stabilizer and propose it to receive a loan allocation.

Motivation

SWEEP can grow liquidity by giving LPs interest on the dollar half of their pools.

Sweep increases Balancer earnings because Balancer charges a 50% fee on interest accruing to metastable assets.

We can apply Sweep to grow Balancer pools on platforms where Balancer has less liquidity, such as Optimism and Avalanche.

Sweep was designed to fit Balancer’s yield bearing asset thesis. A number of design decisions make it well suited to replace zero-interest USD stablecoins in the dollar side of AMM pools.

• Non-rebasing. It fits into any AMM pool
• USD pegging. Users expect USD-denominated assets, not stablecoin denominated assets
• Competitive through the business cycle. Sweep can track competitive yield in CeFi and DeFi by allocating on both sides. This adaptiveness is a useful feature for protocols and pools that are making long-term embedding decisions.
• Mobile. SWEEP moves through efficient mint/burn bridging to all chains served by Balancer
• Active liquidity management. Sweep protocol deploys marketmaker contracts to supply SWEEP and create routes in Balancer AMMs. Stableswap AMMs are the primary channel for purchase, redemption, and funding borrowing.
• Invisible. An AMM is the only interface that most users and LPs need. They do not have to do things like stake and unstake.

Specifications

Governance

Many governance actions are controlled by a 2 of 3 multisig.

The voting and cross-chain governance transactions have been implemented and tested with Tally and a non-circulating SWEEPR governance token. Tthe governance timelock currently has limited powers, and it operates with time delays. It will gain additional ownership over additional powers when the SWEEPR governance token goes into wider distribution.

Oracles

Rate provider for SWEEP: https://arbiscan.io/address/0x3bB6861c0Be6673809D55b9D346b6774B634a9D7

Balancer rate provider review rated it as “Safe”.

The protocol uses a Chainlink oracle to determine the price of USDC or USDT in USD. This guides mechanisms that manage the peg such as calls, mint throttling, and interest rate changes, so that SWEEP can get closer to straight USD pegging and interest. The protocol may also use oracles to price collateral in “stabilizer” vaults.

Audits

Audit report from Sublime: https://github.com/SweeprFi/sweepr-contracts/tree/main/audits/sublime

While Sweep has undergone an audit, it is a new protocol that may still contain some operational and smart contract risk.However, Sweep is not exposed to borrower+oracle exploits because it lends only to a single known qualified buyer for each asset or security vault (called a “Stabilizer”). Technical risk is further decreased when Sweep allocates funding to off-chain securities as they will have enforceable contract rights. The strategies and allocation of SWEEP lending is completely transparent and visible on the app dashboard.

Centralization vectors

Sweep has centralization currently as it is a new protocol, but with a path to decentralization.

Governance actions are controlled by a 2 of 3 multisig held by developers and trusted entities. They are fully doxxed and known to the protocol and the protocol foundation.

Many assets are managed by the protocol. In protocol jargon, the protocol fast multisig is the borrower in the stabilizer vaults. These protocol owned assets include the marketmakers that manage SWEEP and USDC in AMM pools. Sweep invites other wholesale borrowers to bring vaults for assets and strategies. These borrowers will bid to borrow and repay SWEEP, realizing the vision of decentralized bank management. We expect to attract a wider base of borrowers when the deposit pool is bigger.

Under selling pressure, Sweep may need to call loans. The allocation of calls is currently determined by a fast multisig. This will be changed to an algorithm after more modeling and experience.

Market History

This pool has been active for two months. SWEEP has stayed pegged during that time. However, activity has been small, and it has not been tested under sell pressure.

Value

This pool is the primary source of SWEEP liquidity on Arbitrum, and the supply and demand balance in this Arbitrum pool drives interest rates for the entire multi-chain Sweep system.

Balancer is taking the position that working capital in an AMM should earn yield. Sweep is designed and operated to deliver on that positioning.

Balancer earns a fee of half of the interest.

Contracts

SWEEP/USDC pool: https://arbiscan.io/address/0xef093ccfdd4d5a590b028463e0528049939889c9

Arbitrum Child Gauge (Arbitrum Network): https://arbiscan.io/address/0x38E434d74eabaf27169aC1c934886F344e332ba8

Arbitrum Root Gauge (Ethereum Network): https://etherscan.io/address/0x1fD937692B82910a65d3A47AFBC5156AB192038F

Proposal

Transaction: The Balancer Maxi LM Multisig eth:0xc38c5f97B34E175FFd35407fc91a937300E33860 will interact with the GaugeAdderv4 at 0x5DbAd78818D4c8958EfF2d5b95b28385A22113Cd and call the addGauge function with the following arguments:

gauge(address): 0x1fD937692B82910a65d3A47AFBC5156AB192038F gaugeType(string): Arbitrum