Proposal to Upgrade Convex Fed and Adjust Velo & Aura Fed

Convex Fed Upgrade

This proposal aims to redeploy Convex Fed, with new logic that allows the smart contract to deal with any “bad debt” in the accounts resulting from slippage on expansions and contractions. Currently, after fully contracting (burning all supplied DOLA) the Fed, if dolaSupply is greater than 0, this will permanently be seen as “bad debt” in the accounts. This can be resolved by sending the DOLA amount to the contract balance; however, presently dealing with the dolaSupply accounting issue is not possible. The upgraded contract includes logic that allows the DAO to send DOLAs to the Fed in this situation, and have it be burnt from supply meaning it’s officially deducted from dolaSupply in the Feds accounts. This upgrade does not improve security or carry any additional risks; it simply allows for cleaner on-chain accounting. To execute, DOLA minting rights will be removed from the current Convex Fed v2 and given to the new Convex Fed v3. Then liquidity in the DOLA-FraxBP will be migrated over from one Fed to the other in a way that aims to minimize negative slippage experience by Convex Fed v2 (to reduce the unsolvable accounting issue).

Aura & Convex Fed maxLossExpansionBps Adjustment

In order to give greater flexibility to the Fed Chair on AMM Fed liquidity management, it is proposed that the maxLossExpansionBps be increased from 10 bps to xx bps. The current parameter setting has hindered the Fed Chair’s ability to make small targeted strategic expansions and has ultimately cost the DAO additional revenues. A minor increase to xx bps will address this and unlock more beneficial options for the DAO.

Velo Fed maxSlippageBpsDolaToUsdc Adjustment

In order to allow for the DAO to ramp up Fed presence on Velodrome’s DOLA-USDC pool, an increase to the maxSlippageBpsDolaToUsdc is required to allow for DOLA to be swapped to USDC on Ethereum before being bridged to Optimism. Currently, maxSlippageBpsDolaToUsdc is set to 25 bps, which commonly means executing the swap is impossible. This severely limits the ability to ramp the Velo Fed, as Velodrome requires LP deposits to be in both tokens (DOLA and USDC) in the current balance of the pool. Ramping the Velo Fed allows for the DAO’s bribe to the DOLA-USDC pool to be matched with increasing incentives by the Velodrome team, while also farming VELO rewards which are reinvested to DOLA liquidity operations. In order to achieve this, access to the far deeper Ethereum L1 liquidity is required. Increasing the maxSlippageBpsDolaToUsdc to 35 bps will allow for this.

On-Chain Actions

  • Remove Convex Fed v2 as a DOLA minter
  • Add Convex Fed v3 as a DOLA minter
  • Increase Aura Fed v2 maxLossExpansionBps to xx bps
  • Increase Convex Fed v3 maxLossExpansionBps to xx bps
  • Increase Velo Fed maxSlippageBpsDolaToUsdc to 35 bps
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