Why is it tough to improve capital efficiency in decentralized markets? As DeFi markets have grown, protocols have increasingly complex needs in managing their assets and spending commitments.
While the problem of planning for future expenses is present in both traditional and DeFi markets, it is difficult for DAOs to manage treasury funds efficiently with current mechanisms. Traditional institutions can allocate funds to more nimble managers who make day-to-day decisions or use structured products or derivatives for hedging, but DAOs do not have suitable analogues. External managers require strong incentive alignment, which is hard to achieve with the current DeFi infrastructure. While some DeFi derivatives and hedging products do exist, there is no one-stop solution for DAO treasury needs. Finally, DAOs managing their treasury through internal governance is also problematic because it requires a lot of active decision-making.
Today we are happy to introduce Aera, the world’s first autonomous, data-driven treasury management protocol. Our name is derived from various Latin words for public finance, public treasury, and coinage. We believe the solution is fitting of the name’s ancient origin.
Individual Vaults. DAOs access a unique, customized, self-custodial Aera vault where they can deposit token reserves.
Independent Rebalancing. Third-party Guardians can suggest adjustments to the composition of an Aera vault across a set of approved assets to optimize DAO treasury funds based on market conditions.
Access. Withdraw funds on-chain using our dashboard or by writing an event-based script that triggers withdrawal. Our dashboard stats show the composition of the vault, giving DAOs uninterrupted visibility and access to their assets.
To align treasury management incentives in a decentralized way, we need to reward profitable decisions and penalize decision-making that results in losses. Aera achieves this by having decision-makers put their money on the line and grading them on how well they achieve protocol objectives. Every rebalancing proposal in Aera requires funds at stake, and the results create a public track record for participants.
Vault Guardian: A guardian is a party that submits parameters (weights of assets) to an Aera vault to define the allocation of assets in the vault. To participate, a guardian must stake assets and risk a loss if their parameter choices underperform.
Client Protocol: A client protocol is any DAO that deposits a portion of their treasury into an Aera vault to plan for future expenses or commitments.
Arbitrageurs: An arbitrageur is any party that executes the rebalancing by trading assets with the vault. Arbitrageurs are incentivized to continuously rebalance the vault to its target allocation as determined by the vault’s guardians.
Increase Capital Efficiency: With increased confidence, the treasury can cover spending needs, protocols may lower fees and extend more loans.
Save on Operating Costs: Aera can help DAOs meet liquidity needs in the most adverse of times without costly overhead.
Minimize governance: By using Aera, DAOs will outsource treasury management to a decentralized network of participants who are incentivized to maximize DAO goals while minimizing governance intervention.
Today, Aera is in alpha, with one test vault funded and operated by Gauntlet. In Q1 2023, there will be opportunities for beta customers and guardians to join. In the longer term, we see Aera as a robust optimization platform for all sorts of applications. We believe protocols will be able to outsource almost any complex optimization problem to a specialized Aera vault. By helping automate these tasks, we hope to promote efficient and transparent decision-making to drive sustainable protocol growth.
On October 19, 2022, at 11 AM EST, the Aera team will host an Ask Me Anything (AMA) on Twitter Spaces. Questions about the whitepaper, launch, specifications, and other related topics will be answered as best as possible. Submit your questions here.