Aura Finance is a protocol that is built on top of the Balancer platform. Through the social aggregation of BAL deposits and Aura’s native token, the protocol provides maximum incentives to Balancer liquidity providers and BAL stakers.
Recently, despite the bear market, a silent war for DeFi liquidity continues to happen in the DeFi space.
The Balancer wars are getting more complicated as there has been a heavy focus on not only accumulating BAL tokens but also veBAL, the vote-escrowed token of Balancer.
What Is Aura Finance?
With Aura, DAOs can optimize liquidity for native tokens or other liquidity pairs that they want to direct rewards to and can use Aura to better direct rewards than any other way.
The protocol has integrated with Hidden Hand so that DAOs can deploy voting incentives to pools they want BAL and AURA emissions routed toward, at a rate of around ~$2 of BAL and AURA for every $1 of voting incentives. This allows users to magnify their liquidity and yield that way.
Not any protocol can necessarily copy what Aura has done with Balancer, as Aura has a partnership with Redacted, which built the Hidden Hand project.
- The largest decentralized exchange (DEX) Curve Finance has been the most well-known battlefield for liquidity and has spawned Convex Finance protocol to optimize the process and boost rewards.
- Convex’s voting power comes from locking CRV tokens. The protocol encourages users to convert to cvxCRV.
- Thus, staking cvxCRV not only earns users what they would have earned by locking CRV directly but also yields a share of platform fees as well as Convex’s native CVX token.
- The Balancer is another automated market maker (AMM) that is gaining enough steam to attract its own protocol geared towards optimizing native token rewards.
- Built on top of the Balancer system, DAOs or projects can use Aura as they please to accomplish any variety of tasks, mostly with liquidity optimization and treasury management.
- The projects that use Aura today have and continue to use Aura out of their own accord and recognition of its value proposition.
- In theory, they can make proposals to the DAO to form formal partnerships if there is a need for the direct involvement of the Aura community treasury. DAOs like Olympus, Lido, or Gnosis have already contributed millions of dollars to the Balancer ecosystem.
- These DAOs are also focused on passing proposals that accumulate more veBAL while similarly looking at partnerships with protocols and tokens to deepen their veBAL yields.
How Does Aura Finance Work?
Aura brings Convex-style tokenomics to the Balancer ecosystem, fueling the Balancer wars.
Voting locking tokens is also known as the “ve” model” requiring users to lock their tokens to participate in governance. This model has been an ongoing DeFi narrative since January.
veBAL is a fork of veCRV but there are a few notable differences that are important to understand. veBAL is acquired by depositing into a BAL/ETH 80/20 balancer pool and then locking the resulting LP token.
As a result, this creates free and durable on-chain liquidity for the BAL token. In addition, veBAL has a max lock time of 1 year while veCRV is 4 years.
In simple words, users can deposit their Balancer Pool Tokens (BPTs), which represent liquidity positions, in Aura to not only earn trading fees, but also a boosted amount of BAL, which is the Balancer’s token.
This boost comes from vote-escrowed BAL (veBAL), which controls the allocations of BAL rewards to the liquidity pools on the DEX. Aura attracts veBAL because it allows users to exchange their BAL for auraBAL.
In turn, auraBAL can be locked for a required time to yield the normal rewards of veBAL. Moreover, there are also additional AURA and BAL tokens from a performance fee that Aura charges on revenue from liquidity providers.
For BAL stakers, the protocol provides a seamless onboarding process to veBAL by creating a tokenized wrapper token called auraBAL that represents the 80/20 BPT locked up for the maximum time in Voting Escrow where it will allow the Aura system to benefit from its voting power for boosting rewards and voting for gauges.
In addition to Aura system rewards in the form of BAL and AURA are taken as fees from LP’s depositing their LP tokens in AURA, this can be staked to receive existing rewards from Balancer to take advantage of the boost from veBAL locked in auraBAL.
Besides, tokenized auraBAL is given to the user at a 1:1 rate for veBAL, and users can trade their auraBAL back to BAL at any time.
As said, auraBAL can be also staked into the platform to receive normal Balancer admin fees one would get for normally holding their veBAL, in both BAL and bb-a-USD. Staking auraBAL will receive BAL from Aura’s performance fee, as well as the platform’s native token AURA.
Users can also choose to contribute to the Balancer pool auraBAL. Then, they can stake the auraBAL BPT token on Aura Finance to receive a separate pool of AURA rewards for providing liquidity to others to enter and exit the ecosystem via the auraBAL token.
For $AURA lockers, investors can also vote-lock AURA for 16 weeks to receive voting power and govern the protocol. By using the system’s veBAL, you will be able to direct incentives to Balancer gauges. Users earn based on their voting on secondary incentive market-places.
For Liquidity providers, Aura provides a smooth onboarding process to all Balancer gauge deposits.
As such, depositors can achieve a high boost through the protocol-owned veBAL while also accumulating additional AURA. Balancer Pool Tokens (BPTs) are received from https://app.balancer.fi/#/ for depositing assets into a liquidity pool.
Users can stake BPTs in Balancer Gauges to earn BAL rewards. Depositors are given a “boost” that is up to 2.5x based on their veBAL balance. Users need to lock up BAL in the Balancer VotingEscrow to get a veBAL balance.
Aura gives users the ability to continue receiving their staking rewards but at higher APY due to Aura’s protocol-owned veBAL. Aura LPs will benefit from AURA tokens in the form of rewards.
AURA governance tokens, which are used to direct the voting power of the veBAL in AURAbal are minted alongside BAL earned and paid to ecosystem users thereby creating additional incentives.
On the other hand, the AURA token acts as a governance and incentivization tool within the ecosystem. Locked AURA tokens will have governance rights in the system and will vote using the protocol-owned veBAL voting power or internal proposals.
There is a 25% total fee on all BAL revenue generated by Balancer LPs on Aura. 20.5% goes to auraBAL stakers and 0.5% goes to the harvest caller, both fees are paid out as BAL. 4% goes to AURA lockers, paid out as auraBAL.
The protocol optimizes and redirects balancer yields, however, no fees of any kind are earned by the treasury. The DAO controls just under 20% of the AURA supply to be directed by the community.
Aura brings some great ideas to the markets. Let’s look at what it is making a reality:
$AURA is used in Vote Locking that locked AURA will facilitate governance of the Aura protocol.
The governance program has gone live using a snapshot. The community has created a fund for grants, called The Aura Ecosystem Fund to strengthen Aura’s foundations by enabling future builders and developers through grant programs.
In addition, this will help to grow the Aura/Balancer ecosystems through educational programs and marketing-adjacent services.
Aura applies reasonable precautions to ensure the protocol is safe to use. These include fork testing, multiple successful internal auditing, and the $1 million external bug bounty.
Built with user experience in mind as well, DAOs and large whales can easily deploy capital into Aura strategies, and implement it through smart contracts without too much effort due to the ERC-4626 standard Aura is built on top of.
Learn More About Aura
It’s easy to see that when everyone is losing money in a bear market, AURA shows that some sectors of the market are still hot. The Aura seems to be a good place to start amassing ve-tokens.
If you want to learn more about Aura, just click here!