Concerns regarding AUR pool on polygon

I feel that the aur liquidity staking process could be reevaluated to make better use of it.

Right now, I believe that the high apr of the AUR pool is putting sell-pressure on the entire ecosystem. jFIAT stakers earn AUR rewards, and those that want to stake their rewards must do so by selling half of their AUR rewards for USDC and then providing the combined assets to the liquidity pool. This obviously creates sell pressure for aur, but I believe then that carries over to the other assets.

At the moment, 1 AUR-0112 is backed by 33765.2 JRT, 103.09 UMA, and 854 KNC. This backing is worth $4669 at current prices. Ignoring price impacts for AMM pricing, right now 1 AUR-0112 is worth $4539 on KyberDMM. If someone were to hold those balances of JRT, UMA, and KNC, it would make logical sense for them to sell their tokens to arbitrage and buy AUR. This therefore carries the sell-pressure over to the rest of the ecosystem, particularly JRT.

I feel that AUR would be used better if the incentivized pool were instead a JRT-AUR pool on polygon.curve.fi. This has many advantages:

  1. Reduced sell-pressure for the ecosystem. If you don’t need to sell into USDC in order to stake, there’s less pressure for selling JRT. In fact, you will need to buy JRT in order to stake the AUR.
  2. Better peg of AUR-0112 to the underlying assets. Since the intrinsic value in AUR lies in the underlying assets, volatility in the price of JRT will partially cancel through the associated impact on the intrinsic value of AUR.
  3. Less risk of impermanent loss for JRT holders. Due to the behavior of AMMs, if the price of JRT increased several times over, the total value of assets held in the AUR-USDC pool will increase far less than they would if they were not part of the liquidity pool. If the incentivized pool instead pairs JRT and AUR, this risk is significantly diminished, particularly as the value proportion of JRT in the storage vault approaches 100%. Reduced risk will in and of itself incentivize providing liquidity.
  4. Increased awareness of the Jarvis ecosystem. A Curve pool for AUR and JRT will help advertise Jarvis to curve users who might not be using the platforms that are already showcasing Jarvis (eg beefy finance, kyberddm).

I would love to hear what people think about this idea.

3 Likes

i’m ok with you. What do you think about this Pascal ?

Curve pool is currently not an option, and will not be an option for several months. The only curve pools available at the moment would be something like a jEUR-EURS pool.

I realized I made a severe miscalculation when considering the impact of an AUR-JRT pool. If that is the primary pool for aur, here is how a yield aggregator would compound Aur:

  1. Swap AUR for JRT
  2. Swap JRT for ETH
  3. Swap ETH for USDC
  4. Swap ~half of the USDC for jFIAT
  5. LP and stake JFIAT-USDC

I assumed that buying JRT and selling JRT in steps 1 and 2 would negate each other, but I neglected the fact that the sale of JRT in step 2 lowers the intrinsic value of AUR, thus reducing the amount that arbitrage can correct the disparity.

As such, I withdraw any support for my own idea.

Finally not a good idea so, I didn’t see that point…
Anyway, thank you for your proposal.

I saw this point and it will add a leverage effect when the price goes UP but when the price goes DOWN too.

But don’t ignore the fact that at the begining the price of JRT will probably goes UP since some users will participate to the AUR pool.

Also, we could suggest to Yield Aggregator to do not auto compound the jFiat pool itself but to autocompound to JRT-AUR to boost the yield (it is that Harvest is currently doing).

I know that it is a bet but we could test and see by ourselves the effects.
For me it will be neutral (buy JRT at the beginning negate the sell JRT during the program).

What it is sure is that there will be a more volume with the JRT which should add an incentive for JRT holders to participate to be LP (JRT-AUR and/or JRT-ETH).

So I am still PRO this proposal.

As mentioned on discord, I reinstate support for the proposal as it still should benefit liquidity providers, but I am still hesitant about the overall impacts.