Make Aura and Balancer the STG Liquidity Hub on Arbitrum

-Background- Currently, Stargate has protocol-owned liquidity in Arbitrum on a 50/50 STG/USDC.e Balancer Pool, with a TVL of more than $1.5M.The pool facilitates STG swaps and earns trading fees. However, the current pool's yield is not optimized because it only benefits from swap fees.

Stargate already has protocol-owned liquidity on mainnet within Aura Finance in a 50/50 STG/bb-a-USD pool.

-Proposal- Aura Finance is a meta-governance protocol built on top of Balancer. Aura Finance has topped over $700M in TVL on mainnet and has a massive ecosystem of partners that encompasses everything from major lending markets like Aave, to cross-chain infrastructure providers like Stargate, to top LSD providers like Rocketpool and Swell. In total, Aura has obtained and maintained fruitful relationships with over 40 different protocols within DeFi. Based on its success on mainnet, Aura contributors believe in Balancer’s potential to be a first-choice for protocols considering to either seed or grow liquidity.

Aura helps to amplify the effectiveness and growth of Balancer in addition to the protocols within the ecosystem. Aura’s voting incentive markets are one of the most diverse in DeFi, with over 20-30 active participants on any given round. Moreover, Aura has maintained a solid track record in the accumulation of governance influence for veBAL, which has helped to keep markets lively.

We propose the POL migration from the 50/50 STG/USDC.e pool to an 50/50 STG/Boosted Aave V3 USD pool staked within Aura, leveraging the current pool/gauge already available in Balancer and approved by BIP 258. Boosted pools included pools in which a portion of the liquidity, which is normally idle and not used for trading, is deposited into protocols like Aave to earn further yield. The change will help to optimize the yield-earned on this pool by generating the following benefits: -Make this pool more attractive for market participants due to increase of base yield through Aave lending fees; -Enhanced yield generation if the BPT token is staked on Aura; and -Lower cost of the voting incentives;

The ability to replace the current pool with a boosted one means an increase of the base yield thanks to the Aave lending fees. This can attract further liquidity, thus guaranteeing for the pool to be a focal point in the liquidity provisioning of Stargate in Arbitrum. Furthermore, the possibility to stake the POL in Aura will help to increase Stargate's influence within the Balancer ecosystem, which can be later used to support cost-effective STG liquidity and reduce protocol expenses.

Liquidity Providers improve their returns when staking the BPT token in Aura, because the APR is boosted by Aura emissions. This can incentivize third party liquidity providers within the Stargate community.

As the goal is for this boosted pool to be the major liquidity source for STG in Arbitrum, improving the base yield is a sensitive approach. The STG/bb-a-USD boosted pool that is the subject of this proposal has limited liquidity, so it does not promote current swaps or reflect any swap fee APR at this time, though it has boosted APR of 1.22%. These figures are also subject to fluctuation over time. If this proposal passes and we assume the current 1.61% swap fee APR of the existing 50/50 STG/USDC.e pool carries over, the boosted pool and the POL, if deposited, would generate 1.61% in swap fee APR, thus increasing the boosted pool's APR by 1.22% to 2.83%. Because the boosted STG/bb-a-USD pool has swap fees currently set to 1% compared to the lower 0.3% for the 50/50 STG/USDC.e pool, it's likely that the boosted version would provide increased swap fee APR and even more aggregate yield than 2.83%.

With the ability, in future, to further increase the yield of this pool through Aura incentive markets, the STG/Boosted Aave V3 USD pool will provide not only a base superior yield compared to the current solution, but also the flexibility to further grow liquidity in future if desired.

One further advantage of this proposal is that it will greatly benefit the Stargate protocol by enabling them to passively acquire more BAL/AURA tokens, thereby enhancing liquidity provisioning. As stated previously, Stargate already has a strategic position of not only protocol-owned liquidity but also AURA on mainnet. The proposed strategic integration will gradually make the process more cost-effective over time, ensuring Stargate's ability to grow their protocol while leveraging their assets across any chain in which the Balancer ecosystem is either already present or currently deploying. In this sense, the recent expansion of Aura protocol on several L2 (Arbitrum, Optimism, Polygon, and soon Gnosis), will play a key role.

-Execution- $1.5M+ of POL will be moved from the current 50/50 pool to the already available Balancer 50/50 STG/Boosted Aave V3 USD pool on Abritrum, staked in Aura.