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:
- 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.
- 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.
- 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.
- 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.