The Aura of Optimism

Ladies, Ludwigs, and Gentlemen…

Can you feel the stir? The buzz, the soul-bumping rhythm, and the radiant energy in the air? It’s booming, bustling, and full of life. Look at those vibrant purple hues, harmonizing with the BEETS, and reverberating through OP city’s pumping streets. It’s time to boogie, it’s time to jive. Your feet can’t help but lose themselves in the rhythm of the rhyme.

A radiating, booming purple club?! Take a deep breath, and gaze up, it’s time to step into the breathtaking Aura Liquidity Hub!

What is Aura?

Aura Finance is a liquidity layer that plugs into and builds off the Balancer protocol. Just like Convex does to Curve, Aura Finance acquires Balancer’s native governance token, veBAL, and plays a pivotal role in providing network participants with an additional layer to build and liquidity incentivize liquidity.

Liquidity providers can stake Balancer Pool Tokens (BPTs) to earn AURA and BAL incentives; AURA holders can stake and participate in the veBAL voting market, and protocols can offer voting incentives to efficiently incentivize pools with BAL (and AURA) emissions. To date, Aura hosts over 30% of veBAL governance power, allowing it to maximally boost LP rewards, and direct a large share of BAL emissions. With all this, there is no denying that Aura is a pivotal player in the Balancer ecosystem.

Aura Finance hosts nearly $500M in TVL on mainnet and has both established and nurtured an interconnected cohort of protocol-protocol collaborations. From Liquid Staked Token powerhouses and cross-chain infrastructure providers to lending markets and boosted integrations, Aura has already played an indispensable role in empowering the growth of the Balancer ecosystem on Ethereum; now, Aura is positioned to fuel growth on Optimism.

Why Op?

Optimism currently sits as the number 2 Ethereum scaling solution with a TVL of over $835M. With the recent Bedrock upgrade, the Superchain thesis has flourished into reality. Combined with the looming launch of Base, opBNB chain, and continuous development of the OP Stack, Optimism looks poised to attract greater attention and liquidity. With the launch of Aura, these developments present an opportunity to cement the joint Balancer and Beethoven X deployment as a core technology and liquidity host on the network.

In particular, the Liquid Staked Token market has seen a rapid rise in liquidity in the past year, growing to be the largest DeFi liquidity category with a combined TVL of $20.754 billion. Shifting LSTs onto layer 2’s offers superior speeds and minimal fees. It’s a capital efficiency masterclass, that we believe is ripe for continued growth. Presenting streamlined liquidity and incentivization mechanics on the most efficient Liquid Staked tech in DeFi, Aura is now primed to supercharge LST growth on Optimism!

Why does this benefit Beethoven X

Launched in 2022, in a truly unique DeFi partnership, the Optimism DEX is a joint Balancer / Beethoven X deployment. Beethoven X takes care of the front end, while the underlying “native” incentivization contract is controlled by veBAL governance and BAL. BeethovenX’s DAO governance then adopted an additional incentivization proposal, where it committed to allocate 50% of its share of the protocol fees, converted to OP, matched with Beethoven X’s OP grant, and emitted to pools as liquidity mining or gauge incentives.

Since its launch in July 2022, the joint Balancer and Beethoven X Optimism deployment has demonstrated its innovative prowess, becoming the primary host of LST liquidity, amassing $60 million in TVL in April 2023, and generating approximately $370k in protocol revenue. While these metrics are indeed commendable, there is room for improvement. With the recent emergence of L2 veBAL Boosts, there is the opportunity to leverage the impending launch of Aura and make considerable improvements to network market share.

With 15+ protocol launch partnerships secured and many more interested, this venture is set to ignite a thriving new micro-economy in the Optimism ecosystem. As a central hub, Beethoven X, Balancer, and Aura look to play an essential role in facilitating liquidity growth on Optimism. With a brand new liquidity layer to help stoke the fires of growth and implement efficient fly-wheeling incentive programs, users will soon realize the benefits of this synergistic collaboration.

Incentives Structure and Grants

This unique collaboration between Beethoven X, Balancer, and Aura, ensures Optimism Liquidity Pools will now receive incentives in the most efficient and sustainable means possible. Currently, Beethoven X adopts a protocol fee grant-matching structure in order to incentivize pools. Of Beethoven’s share of the protocol fees, 50% is swapped to OP, matched 1:1 with OP grant funds, and emitted back to the pools as liquidity mining incentives. This method aims to significantly increase emitted rewards whilst also maintaining a level of sustainability.

With the anticipated launch of Aura and cross-chain veBAL boosts, Beethoven X, Balancer, and Aura will unlock more efficient means to foster liquidity growth. How? Historically, Aura has provided the Balancer ecosystem with an additional liquidity layer enabling efficient vote markets. As such, Beethoven X’s current OP grant matching program can shift to being deployed as gauge vote incentives to direct BAL and AURA emissions to increase protocol TVL efficiently. If voting market efficiencies reduce, the incentive program can continue to emit direct liquidity mining incentives on pools.

Aura has also proposed an OP grant that would distribute additional direct LP incentives or match bounties placed on any Aura voting markets with OP. The protocol aims to use their grant in one of two ways. The first method would have OP tokens matched with protocol-provided voting incentives to vlAURA holders, increasing the Aura Optimism voting market and directing a larger share of BAL tokens to Optimsm Pools. Option 2 would see the OP grant distributed directly to LPs, at a 1:1 ratio with BAL and AURA incentives. The method would be decided upon depending on the current efficiency of either method at the time. Should this grant pass successfully the combined outlined incentive structure has the potential to return a net 100% of protocol fees back to users as rewards.

Balancer Pools also implement an effective liquidity flywheel aimed at nurturing the growth of its pools: The Core pool flywheel! Pools comprised of over 50% yield-bearing, or 8020 pools have the ability to gain core pool status. From these pools, 65% of Balancer’s protocol fee is automatically provided as voting incentives for the pool from which it came. More incentives of course means more TVL and, due to Balancer’s innovative tech allowing fees to be taken directly from yield-bearing assets, more TVL now directly correlates to more fees. This closes the loop and ignites a perpetual growth flywheel in the Balancer ecosystem.

Currently, only 25% of the protocol fees are recycled on the Optimism DEX, but a restructure of the Balancer incentive program is currently under discussion. With the approval of Aura’s OP grant, the proposal would see this protocol fee recycling, OP grant matching, and efficient voting market strategy yield a staggering 260% return of protocol fees as Liquidity Mining incentives (130% without Auras’s grant).

Future Potential

Layer 2 performance. Superchain potential. Efficient Liquidity flywheels. Lucrative incentives structures, and a flourishing community. There’s no denying that the stage looks set for Aura’s arrival on Optimism! With all launch pools being either LST-dominated or boosted pools, this endeavor will combine some of the most efficient primitives from the Balancer ecosystem with the enhanced liquidity layer of Aura, resulting in core infrastructure primed to catalyze liquidity growth on Optimism.

Protocols can now harness one of the most efficient liquidity flywheels on Optimism and Liquidity Providers will benefit from the ongoing incentivization flywheels. Put simply, strap on to your seats.

Symbiotic Liquidity growth is about to ignite!