Incentivize SILO/ETH Pool on Balancer

PS: The proposal intends to encourage a community-wide conversation only. Token holders are encouraged to discuss the proposal and improve it.

TL;DR

  • Having a pool paired with ETH will likely result in less impermanent loss than our current pairing with FRAX.
  • We can migrate incentives to a SILO/ETH pool on Balancer.
  • Balancer pools are well integrated with CMC/CG as well as DEX aggregators, providing easier access to parties interested in holding $SILO.
  • When ignited, the $SILO Tokemak reactor can direct additional liquidity to the balancer pool. At the moment, Tokemak cannot deploy liquidity to Balancer pools, however, the integration is coming soon.

Introduction

There are several shortcomings of the SILO:FRAX Curve pool that have hindered it from attracting liquidity despite high staking APR:

  • Pairing with a stablecoin exposes LPs to more impermanent loss than that with ETH.
  • Crypto websites such as CoinMarketCap and CoinGecko don’t read token prices off of Curve factory pools.
  • DEX aggregators such as 1Inch don’t route transactions through Curve factory pools.

As such, the SiloDAO can explore the possibility of incentivizing a SILO/ETH pool on an on-chain exchange that is widely used by users, DEXs, and crypto websites.

Proposal

One AMM we can consider is Balancer. Silo/ETH pool already exists on Balancer. The pool has a gauge and therefore veBAL holders can vote to direct emissions to the Silo/ETH pool. There seems to be a proposal to kill inactive gauges, including Silo’s gauge, however, we can always ask the community to deploy a new gauge.

Balancer pools are well integrated with CMC/CG as well as DEX aggregators, providing easier access to parties interested in holding $SILO. Another advantage to using Balancer is that Tokemak will integrate with Balancer soon. This means when we ignite our $SILO reactor, it is possible to direct SILO/ETH liquidity to our Balancer pool - the decision is ultimately made by $TOKE holders.

Token holders can incentivize migrating liquidity from Curve to Balancer. At the moment, the SiloDAO uses 130K vlCVX to direct incentives to the SILO/FRAX pool. Alternatively, the DAO can use the same amount to collect bribes and use them to incentivize the balancer pool - bribes can be sold into any token asset such as USDC, ETH, or even SILO, and use the proceeds to bribe veBAL holders to vote on SILO-ETH emissions.

3 Likes

I agree with all points made. Being on curve factory pool is very limiting and the migration could only help SILO!

Tokemak also supports Curve, so SILO/ETH on Curve might be better but I agree 100%

1 Like

Hello everyone! Glad to see we’re not the only ones thinking about these things.
For full disclosure, i am one of the co-founders of Paladin. We have both liquidity on Curve (PAL-ETH) and on Balancer (PAL-USDC).
Expanding on Balancer will have a significant positive outcome for SILO, especially if you keep the Curve pool because arbitrage between the pools will help increase the trading volume.

On top of what Aiham explained, I believe exploring the 80/20 pools could be very interesting as it would enable Silo (or even Tokemak) to deploy much deeper pools with less non-SILO tokens.

As for incentivizing the pools, the veBAL locking wars have only just begun and there is definetely a good window of opportunity to enter the game.

If you wish to do so, we have made Quest compatible with Balancer.

Thank you, Figue for the input. The only concern is that if the DAO incentivizes both pools with the available 130K clcvx, incentives will be stretched thin across 2 pools, offer little APY to attract liquidity.

Let’s assume we split incentives equally between the two pools, would the bribes still be significant to generate enough emissions to the balancer pool? that would be 65K vlcvx worth of bribes every 2 weeks.

1 Like

You’ve specified that your priority is attracting liquidity. For almost everyone with tha goal in mind, the past few months have been rough. A lot of LP are either rekt by the IL, waiting for a pump back up or simply don’t believe the risk / reward ratio is worth it anymore.

But that’s not true for everyone and everywhere. For example, our Curve pool has had 100% APY for 2+ months (thanks to our use of Quest) but our DAO still owns 75% of the pool. On the other hand, as soon as we started playing with veBAL, our (admittedly shallower) Balancer pool quadrupled in size (was at 200% APY before we fumbled this week’s rewards program, should be back next week).

So, what was the difference ? Higher APY ? Maybe, but that was only temporary. The 80-20 pool also reduces the amount of non-native tokens needed to use to enter the pool, reducing the prospective risk for non-SILO tokens.

As mentioned in the previous message, I still think the Curve pool is necessary in this setup as it also enables to have the selling pressure passing there (more efficient than on an 80/20 pool).

About the efficiency of the pools, right now is Silo voting 100% for its own pool ? (I see 130k votes in the past round). Dividing it by two would push down the APY from 100% to 60%. In exchange, you would be able to farm 4500$ bi-weekly of bribes.
Currently 2250$ of weekly bribes get you 22,500 veBAL or 4000$ of incentives (BAL pumped hard, so bribe price might slight rise), that’s ~20% APY for a 1M$ pool and a 1.77 ratio of incentive efficiency.

1 Like

Is the rationale behind less impermanent loss the assumption that if eth loses value then so does silo? Because at somepoint there might be a pump In silo evaluaation. Is the 80/20 a hedge against impermanent loss at that scenario?

Yes thats the idea. And the 80/20 pool would have even less IL given that its mostly composed of SILO tokens. You can read more on these pools here https://twitter.com/BalancerLabs/status/1538925260438769665?s=20&t=RAvtMsqij0yPlPiwMhVnpQ

Yes, If SILO increases in value, IL is expected. I don’t think 80/20 pools are effective at facilitating large trades. They are certainly not a hedge. They simply cause IL to accrue more on one side of the pool (SILO in this case) than ETH, but that comes at the expense of only utilizing a small % of the pool for trades.

80/20 pools are great for many scenarios like the way Balancer use the pool to stake BAL for veBAL. But they are not efficient for a primary source of liquidity - which is our goal.

Curve is great, but factories pools are not indexed unfortunately.