How DAOs Are Capitalizing On Aura Finance To Maximize Balancer Voting Rights
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Some of the crypto sphere’s biggest decentralized autonomous organizations are looking for ways to optimize the liquidity of their native tokens, and they’re increasingly turning to the Aura Finance protocol on Balancer to do just that.
Aura Finance is a complex DeFi protocol that enables DAOs to optimize liquidity for their own tokens or other liquidity pairs they’re interested in directing rewards to. In addition, they can utilize Aura to influence the direction of rewards to other projects they may benefit from.
By integrating with Hidden Hand, Aura enables DAOs to deploy voting incentives on the liquidity pools they wish to route BAL and AURA rewards to, at a cost-effective rate. In this way, they can magnify the liquidity and yield of those pools.
DAOs including Olympus, Lido and Gnosis have already directed millions of dollars’ worth of tokens into Balancer, a popular DeFi ecosystem that encompasses an automated market maker (AMM), decentralized exchange, and liquidity platform. At the same time, those DAOs have focused on passing proposals that accumulate “vote escrowed BAL” tokens, while looking to partner with other protocols and tokens in order to deepen their yields from veBAL.
It’s a scramble for control of the Balancer ecosystem that has been dubbed the “Balancer wars“, in comparison to a similar tussle that ignited in the Curve DeFi ecosystem in 2021. With the Balancer Wars, multiple crypto protocols are vying to influence the ecosystem so as to bring additional benefits to their own projects, leading to a scramble to accumulate more BAL. These benefits include being able to vote on key decisions, such as the amount of mining rewards for various liquidity pools that DAOs might be invested in.
Previously, the only way to accumulate veBAL was to acquire Balance Pool Tokens (BPT) from Balancer’s 80/20 BAL/WETH pool. However, with the entry of Aura Finance, DAOs have suddenly found a much better way to influence the protocol.
How Aura Finance Is Boosting Utility
Aura Finance is a decentralized, community-led protocol that’s designed to maximize the incentives for Balancer liquidity providers and holders of veBAL. To do this, it kicked off with the launch of its native AURA token in June, which magnifies the influence of AURA-controlled veBAL tokens. As of October 2022, AURA had accumulated over $500 million in total value locked to become the 20th largest DeFi protocol.
Aura then launched auraBAL, which acts as a liquid wrapper for veBAL. It can be acquired by depositing liquidity into Balancer’s 80/20 BAL/WETH to obtain veBAL and then converting to auraBAL before being staked to receive not only the regular Balancer fees for holding veBAL, but also additional BAL rewards from Aura’s performance fees, as well as AURA.
In addition, auraBAL holders have the option to contribute those tokens to the auraBAL/(80/20 BAL/ETH BPT) pools on Balancer to receive auraBAL/BPT tokens. These can then be staked on Aura Finance to earn a separate pool of AURA rewards for providing liquidity to other users.
In this way, auraBAL provides superior utility to the Balancer ecosystem, with its multiple rewards compared to staking traditional veBAL, while also eliminating the need to relock veBAL regularly. As Aura accumulates more veBAL, the protocol continues to scale and gain influence.
Seizing the advantage and making things even more complex, Aura Finance followed up by launching “vote locked AURA” tokens. With this, users lock their AURA to receive privileges such as the ability to vote on changes to the Aura protocol, direct funds from the Aura treasury, vote on Balancer snapshot proposals and earn rewards with additional auraBAL. In addition, vlAURA token holders can also participate in Balancer gauge voting to earn revenue for lending their votes
DAOs Race To Accumulate
With the clear utility provided by Aura Finance, a number of DAOs have been racing to accumulate AURA, auraBAL and vlAURA in an effort to gain influence over the ecosystem.
Some of the biggest players in Aura’s ecosystem include Badger DAO, which previously accumulated a significant amount of BAL and has now been growing its holdings of AURA for gauge voting. Meanwhile, Olympus DAO recently passed a proposal that added BAL and AURA to its strategic asset whitelist, enabling it to maximize its veBAL holdings. Additionally, Redacted has proposed locking all AURA that flows into its treasury in order to increase yield on strategic partner liquidity pools, and to relock AURA to maintain the benefits of holding vlAURA. With this, Redacted would be able to use vlAURA to influence votes that are beneficial to its own ecosystem, the proposal states.
The Balancer War incentives have proven to be seemingly irresistible for a wide range of DAO-led crypto protocols because they can bring huge benefits to their own projects. To win voting rounds and obtain those benefits, protocols are racing to accumulate as much veBAL as they possibly can. Now, with Aura Finance throwing additional benefits into the mix, it has been able to incentivize veBAL holders to stake those tokens in return for some incredible reward multipliers and accumulate even more voting power than before. As a result, Aura Finance has risen from nowhere to become one of the largest players in the Balancer ecosystem and a rising star in the overall DeFi world.