Premise
This is the Gate-2 Vote for the Auxo Migration first voted in Nov 17, 2022. The previous vote passed with 98.97% For, showed overwhelming support the Auxo Rebranding and DAO migration. In the past 4 months, the team has been working non-stop on the development of that vision, the following document represents a summary of the updated proposal shared with the community during the months of development. The resulting vote lay down the specifics of the tecnical implementation and policies of the new system and authorize the deployment of contracts.
At the time of writing 2 audits have been completed with Quantstamp, the repository with be published as soon as the final reports are available.
On-chain governance
In Auxo DAO, ARV holders are requires to delegate their tokens in order to use their voting power. While delegating voting power to others is permitted, holders delegating to a different address from the one holding ARV are not eligible for rewards.
State of access control & decentralisation roadmap
On-chain governance comes with a great degree of responsability to token holders which are required to fully understand the calldata to be executed - and its implications - for votes that end up passing.
We understand this is a radical change from Snapshot voting and as such this proposals includes a two stages roadmap that will give full permission to the new Governor Contract while allowing token holders to adapt to the new system.
Stage 1
Stage 1 refers to the state of permissions at the time of deployment and during the entirety of the migration window.
During this stage the Ops Multisig retains:
-
The
ADMIN_ROLEand theEXECUTORon the Timelock Contract.
Meaning it can bypass certain governance restrictions -
The
Ownerrole in the proxies contract.
Meaning it can modify all upgradeable contracts -
The
ADMIN_ROLEandMINTER_ROLEin the Auxo ERC20 Contract.
Meaning it can control the supply of Auxo
The Upgrade Contract, in charge of performing an atomic migration from veDOUGH to either ARV or PRV has the necessary MINTER_ROLE for the Auxo ERC20 Token in order to process migrations.
The TockerLocker contract, responsible of managing the users locks, whitelists the Upgrade contract.
Stage 2
Stage 2 refers to the state of permissions up to 60 days after the migration window is completed. Such period is proposed to ensure that the system is stable.
By the end of this second stage:
- The
ADMIN_ROLEis removed from the Ops Multisig in the Auxo ERC20 Contract and moved to theGovernor. - The
MINTER_ROLEis removed from the Ops Multisig in the Auxo ERC20 Contract and moved to theGovernor. - The
MINTER_ROLEis removed from theUpgrade Contractin the Auxo ERC20 Contract. - The
Upgrade Contractaddress is removed from the whitelist of theTockerLockercontract.
Governor
On-chain governance is based on the Open Zeppelin Governor contract, which allows for on-chain voting similar to Compound’s Governor Alpha & Bravo.
The voting power of each account in our governance setup will be determined by the balance of the Active Rewards Vault. A non-transferable token which implements ERC20Votes extension and keeps track of historical balances.
The Governor implements the following parameters:
Voting Delay: 13140 blocks (~= 44 hours)
The delay between a proposal being created and it being able to be voted on, in blocks
Voting Period: 50000 blocks (~= 7days) TODO
The duration of a vote in blocks
Proposal Threshold: 10000 ARV
Minimum amount of ARV to cast a vote
Quorum: 5%
Minimum percentage of tokens that must vote to pass a proposal
Timelock
The governance setup implements GovernorTimelockControl that binds the execution process to an instance of TimelockController. Practically speaking, this adds a delay to all successful proposals in addition to the voting duration.
The Timelock implements the following parameters:
Timelock Delay: 1 days
Delay between vote passing and ability to execute through timelock controller.
Timelock Admin: 0x6458A23B020f489651f2777Bd849ddEd34DfCcd2
Admin can circumvent gov delays on the timelock, useful in post-deploy operations.
Timelock Executor: Anyone 0x0000000000000000000000000000000000000000
Who can call execute() on the timelock controller
Rewards Vault
Auxo offers two rewards vaults to participate in the farming operation. The two vaults have different properties and offerings. It is possible to hold Rewards Vault at the same time in one address.
All rewards are distributed in WETH without dilution of the AUXO token.
The distribution frequency is every calendar month.
Active Rewards Vault
The Active Rewards Vault (ARV) is used for on-chain governance in Auxo DAO. ARV is the direct successor of veDOUGH, it promotes long-term alignment, and encourages participation in the decision-making process. Minting ARV with AUXO is subject to the same lock-up weight system we are used to in veDOUGH with the only difference that only one lock is allowed per address.
Users who desire to manage multiple locks with different unlock times need to do that using multiple wallets. Smart contract wallets need to be explicitly whitelisted to use ARV.
Settings TokenLocker
Minimum Lock: 6 months
Maximum Lock: 36 months
Incentive curve: y=x/k*log(x)
Holders of ARV can:
- Increase the duration of their lock at anytime.
- Increase the amount of locked token, which restarts the lock.
- Boost the lock to the Max available time.
- Withdraw AUXO at the end of the lock.
ARV introduces the possibility to early terminate their lock by paying a penalty of 20% and exit to the Passive Rewards Vault (PRV).
Rewards in ARV
Auxo introduces Rewards Levels to advantage long-term stakers with a better reward ratio and creates incentives for holders to maximize their positions continuously.
A scale of 31 levels is introduced, from 0 to 30. Each level has a multiplier that impacts the rewards received based on the remaining lock time — from 1 to 0.0833. At level 30, rewards are multiplied by 1, while at level 0 are by 0.083.
- One level is lost every month unless the lock is boosted.
- Holders with at level 30 (36 months remaining) always earn the most.
- Level 0 is assigned to staking positions within 0 to 6 months remaining lock time.
As before, holders of ARV are required to vote in order to become eligible for the monthly rewards distribution, however voting participation is greatly simplified.
Simply put, only ARV holders who voted in the month previous to the distribution are eligible to receive rewards. Once assigned, rewards do not expire and are not slashed even if the same holder does not vote in the future.
The new eligibility mechanism makes it simple to understand who is entitled to receive rewards, the entire process does not require knowledge of the previous state of an address and redistribution of inactive stakers happens every single month.
The ARV vault will receive 70% of the total rewards distributed by the Treasury.
Passive Rewards Vault
The Passive Rewards Vault (PRV) offers the possibility to participate in the Auxo ecosystem outside of governance related matters. PRV is created by depositing AUXO into the vault at a 1:1 ratio and the vault token can be staked to earn rewards.
PRV implements a delayed withdrawal mechanism to AUXO, PRV holders can burn their token to get AUXO back — subject to the availability in the vault.
Secondary markets may support the trading of AUXO/PRV at varying rates.
Withdrawal mechanics
The amount of PRV that can be redeemed for AUXO each epoch (redemption availability) will vary based on how the price of AUXO trades compared to the treasury net asset value (NAV). As NAV is considered to be the fair market value for AUXO, the redemption mechanism was designed to help the price stabilise around the NAV (denominated in ETH).
The system will work as follows:
At the beginning of each epoch, the price of AUXO will be assessed based on how it is trading relative to the NAV.
-
Shall the price of AUXO (denominated in ETH) trade at a discount, no AUXO will be redeemable through PRV in the given epoch.
-
Shall the price of AUXO (denominated in ETH) trade at a premium, PRV will be redeemable for AUXO proportionally to the magnitude of the premium per se. Simply put, the larger the premium, the more AUXO can be redeemed through PRV.
In code terms, withdrawals only active in a given epoch if(AUXOETH > NAV_eth*(1 + B%))
where:
- AUXOETH, is the price of AUXO denominated in ETH
- NAV_eth, is the net asset value of AUXO denominated in ETH
The B factor is a parameter ranging between 5% and 50% that will act as a ‘buffer’ (hence the B) and will be selected by the treasury committee each epoch. The B factor exists to mitigate additional selling pressure that could suppress the price of AUXO into further discount.
For instance, if at the beginning of an epoch AUXO will be trading at a 50% premium with respect to its NAV, then the B factor may be chosen to be somewhere between 5% and 15%. In other words, the magnitude of the redemption of that epoch will be as big as to allow enough selling pressure to bring down the price to 5% or 15% above NAV. Practically speaking, if the entire redemption availability gets filled and organic selling pressure adds on top of if, the price may very well trade within the buffer (below NAV*(1 + B%)).
On the other hand, if at the beginning of the epoch the price of AUXO finds itself trading below a 5% premium to NAV, then no redemptions would be put in place for the current epoch. This because, shall redemptions be activated as to bring the price down to NAV, additional organic selling pressure may add up and suppress the price further in undervalued territory.
In sum, the buffer will act as an additional price stability mechanism where the higher the premium vs NAV at epoch start, the more room there will be for PRV redemptions into AUXO.
The system described above implies that shall there be little demand for AUXO (aka, AUXO trading at or below NAV) no redemptions would be available for PRV holders until the price starts trading at a healthy premium. On the other hand however, in periods of high demand and higher price appreciation, redemption rates can turn to be quite high thus allowing PRV holders to own more liquid holdings while at the same time ensuring the price of AUXO not to trade at many multiples above its fair market value.
PRV is a fully backed future claim on AUXO which earns rewards. PRV holders bet that AUXO price will be trading at healthy levels and get rewarded for stabilizing the market when it is trading at discount to NAV by keeping AUXO away from circulation.
Rewards in PRV
PRV receives 30% of the total monthy distribution of WETH rewards which are distributed via the PRV Staking Contract.
PRV Stakers are not required to vote to get rewards and are not subject to lock.
- Staking PRV is epoch based.
- Staked PRV tokens are never locked but need to be staked for the entire epoch in order to receive rewards
- PRV unstaked in the middle of an epoch give up their rewards.
- Staked PRV continue to earn rewards in perpetuity until unstaked.
Staked PRV can be withdrawn at any time and transferred, but once withdrawn, the user would have to re-deposit and wait for a full epoch to finish before being eligible for rewards.
Rewards for PRV non-qualifying will be redirected to operations.
Rewards Notarization Process
Prior to a distribution, the DAO will gather staking data for ARV and PRV from relevant sources, and construct a view of the proposed rewards distribution.
This will be shared to DAO members, ARV holders will be asked to vote on the validity of the proposed distribution.
- If the distribution is notarized (voted as valid), the DAO will distribute rewards via a distributor contract.
- If not, the DAO will resolve any issues and resubmit a new proposal for distribution.
Rewards will be distributed in WETH and will be claimable via the Merkle Distributor Contract.
In Auxo, there’s no need to keep voting in order to keep the right to the share of previous rewards.
Migration mechanism
The migration for veDOUGH to AUXO will happen through the Upgrade Contract, the contract is responsible for:
- Interacting with the previous TokenLocker contract deployed at
0x6Bd0D8c8aD8D3F1f97810d5Cc57E9296db73DC45 - Handle the aggregation of multiple locks into one.
- Handle the migration of a single lock.
- Mint AUXO from DOUGH at a 1:100 ratio
- Mint PRV and automatically stake it on behalf of users.
- Lock AUXO to the ARV Vault on behalf of users
All the actions are performed atomically in the same transaction.
It is possible to select a new receiving wallet exclusively when migrating locks one at the time. The receiving wallet needs to be new to the ecosystem and cannot have an existing ARV lock or a veDOUGH lock.
Migration window
The migration window will be of 30 calendar days where the starting date is to be announced based on the outcome of this proposal.
- There will be no future migration windows.
- Any remaining veDOUGH will be unlocked for holders to claim their DOUGH
Aggregation
When migrating to ARV, the Upgrade Contract will take into account the months the user was previously locked in veDOUGH and lock the AUXO by the remaining time available unless otherwise selected by the user.
During aggregation to ARV, all the msg.sender DOUGH locks will be merged into one single lock. The new lock duration will be determined by the remaining time to expiration of the longest DOUGH lock, enforcing a minimum of 6 months. The end date will be derived from adding the new lock’s duration to the date you migrated.
In case the user decides to Aggregate&Boost, all the AUXO minted will be locked for 36 months and updating the start date to the transaction date: in such case, the amount of ARV will be 1:1 with the amount of locked AUXO, and the msg.sender will start his lock with the highest rewards level: 30.
Single lock migration
The Upgrade Contract offers the option to migrate locks one-by-one, it is useful for those looking to split their exposure between ARV and PRV or those who are looking to mantain the exact same expiration time for all their locks.
Auxo anti-dilution tokenomics
Auxo is an ERC-20 Token that represents share of the Auxo DAO treasury.
The AUXO token has a strictly controlled policy of expansion, it is designed to be non-dilutive versus the net asset value (NAV) of the treasury, there is no mechanism of inflation.
At the end of the migration window, the AUXO token will be fully distributed to it’s token holders. The total supply of AUXO will be given by the amount of veDOUGH migrated + 20% held by the DAO at exclusive use of protocol-owned-liquidity and market making.
The Net Asset Value for AUXO will be calculated as total assets held by the protocol divided by the total AUXO supply, in math terms:
NAV = Assets / Total_Auxo_Supply
Assets will comprehend:
- Liquid assets held in the treasury
- Illiquid assets held in the treasury
- ETH side of AUXO-ETH pairs where the treasury is providing liquidity
The valuation of the assets will follow a 7 day TWAP. The price of liquid assets will be recorded for TWAP computation every day at market open.
The price of illiquid assets will vary based on the nature of the liquid asset itself. In case of escrowed tokens such as esGMX (which the treasury currently holds), their price will be assumed to be the same as liquid GMX.
It is only possible to mint new tokens, pending governance approval, with the inflow of new capital in the treasury at NAV value through a mechanism known as bonding. This feature ensures that previous holders are not diluted from newcomers joining the DAO.
Protocol Owned Liquidity
Auxo aims to own within the DAO the vast majority of its liquidity, a process often refered as protocol owned liquidity (POL).
As Auxo generates value for its stakers directly from the yield it generates through treasury farming operations, it is reasonable to assume that a fair valuation for the AUXO token must fall somewhere near its Net Asset Value (NAV). For this reason, the initial price of AUXO set by the DAO when launching the AUXO-ETH pool will be exactly the NAV.
To favor capital efficiency, the AUXOETH liquidity will be deployed on a series of Uniswap V3 ranges. Pool parameters and market making operations will be conducted as described below.
In an ideal scenario, the price of Auxo will trade at a slight premium with respect to its NAV. The goal of protocol conducted market making operations is to facilitate the price to gravitate around this ideal premium.
To start, the protocol will deploy a base layer of liquidity on the following range:
Upper bound = NAV * ub_factorLower bound = NAV * lb_factor
Where ub_factor and lb_factor are selected by treasury operators and define the distance of the upper and lower bound respectively from the NAV. The figure below provides a visual representation of how liquidity is intended to be deployed.
Additionally, the treasury will deploy additional liquidity in a number of sub-ranges that are intended to work as support and resistance to the price in order to support convergence towards healthy price action.
Last veDOUGH Distribution
Should the proposal pass we collectively agree the last veDOUGH distribution will be done in after the vote for PIP-67 closes with the rules explained below. All the future distributions will be done under Auxo.
Because it is the last veDOUGH distribution, we propose to flag all wallets as active following the regular slashing policy.
This exception will involve all the wallets which have not voted in the last 2 months and therefore are in a pending state where accrued rewards are frozen waiting for either reactivation or slashing. The last distribution is likely to be “partial”, because shall the vote close somewhere in the middle of April, it would distribute only what’s being farmed between the last distribution in April and the day of the start of the migration.
Future development
This proposal is fully centered about the Auxo Rebrand, its governance parameters and migration mechanics.
Nevertheless, it’s worth touching on some of the areas of research that the DAO has been discussing as future development from a vision standpoint and the general direction being explored.
Disclaimer: Please note that the product Auxo Lend, Karma and STAT are currently in its design phase and are subject to change at any time. The features, specifications, and design elements discussed or presented may not represent the final product. The information provided is for informational purposes only and is not a guarantee or promise of the final product’s functionality, performance, or appearance. The DAO reserves the right to modify or discontinue any aspect of the products design without prior notice. Any decisions made based on the information provided are done so at your own risk.
Auxo Lend
Auxo Lend, a treasury-supported credit market, offers the most capital-efficient borrowing solution for DAOs through fixed-income lending.
By leveraging its treasury and reputation, Auxo Lend enables DAOs to obtain highly efficient on-chain financing without risking liquidations. This increases the available capital for deployment by borrowing at a fixed rate, without locking collateral away from yield strategies, ultimately leading to higher returns for stakers.
Auxo Lend provides various lending pools with differing insurance rates for depositors. For example, pools may be principal-insured at 10%, 25%, 50%, 75%, or 100%. Each pool will have a maximum availability limit and offer a fixed annual percentage rate (APR). As expected, pools with lower insurance percentages will yield higher returns compared to fully insured pools.
Auxo Lend vision is offering reliable, robust, and secure protected pools for DeFi users, enabling them to confidently secure high yields from a wide range of cross-chain protocols while mitigating various risks. By levering our proprietary risk-framework and providing comprehensive safeguards, Auxo Lend helps users navigate the DeFi landscape with peace of mind, maximizing their returns and minimizing potential threats.
Karma
Karma is designed to drive an incentivization system for digital cooperativism that fosters positive outcomes.
While not definitive, DAO members could potentially earn Karma by offering valuable services to the organization, such as:
- Conducting risk analysis for DeFi protocols
- Managing front-ends
- Bootstrapping liquidity
- Leading marketing initiatives
- Developing software
In contrast, Karma could be used to access benefits within the Auxo Ecosystem, including:
- Priority withdrawals for PRV
- Guaranteed allocation in Auxo Lend Pools
- Selected fee rebates
Karma’s vision encompasses the development of coordination-focused tools for digital cooperativism. Its ultimate objective is to encourage experimentation in creating incentivized structures for decentralized organizations, thus supporting a constantly growing ecosystem of innovative projects.
We believe that active and engaged governance is essential for scaling decentralized systems, and incentives should reward users for their contributions to the community while promoting positive-sum games.
STAT
STAT is a framework designed for deploying Sufficiently Trustless Active Treasuries, enabling communities to allocate capital and generate yield across multiple chains on behalf of token holders without depending on a select group of signers to avoid collusion.
Built upon the robust and battle-tested Gnosis Safe multisig and the Zodiac Framework, STAT facilitates non-custodial and active treasury execution with precise control over multisig capabilities and limitations.
This includes specifications regarding which assets can be utilized, how and where they can be used, the contracts they can be approved for, and more.
Conclusions
The Gate-2 Vote will be on Snapshot in the upcoming days, shall the vote pass, it confirms consensus for:
- The migration to Auxo as described in this document
- The governance parameters for the on-chain governance
- The terms of the last distribution
Temperature check
- For
- Against
0 voters
.