Protocols continually seek innovative solutions to enhance liquidity and optimize treasury management. Building on our recent blog post covering how Liquidity Mining and Protocol-Owned Liquidity (POL) can drive long-term protocol growth, today we explore how these strategies can be executed through Aera.

Aera is a decentralized treasury management protocol tailored to DAOs and onchain treasuries. Its flexible and customizable architecture allows onchain treasuries to set comprehensive treasury goals aligned with community objectives.

Today, we cover Aera’s unique approach to POL and Liquidity Mining, showcasing how the Aera Guardian role ensures optimal incentive management and liquidity deployment. Through these mechanisms, Aera empowers protocol treasuries to reach their liquidity goals and drive ecosystem growth.

1. How Aera works

2. Protocol-Owned Liquidity (POL) with Aera

3. Liquidity Mining with Aera

4. Joint Optimization

How Aera Works

Aera offers a DeFi-native treasury solution that supports alignment with community objectives while being highly responsive to real-time market conditions.

DAOs or onchain treasuries access a unique, customizable, non-custodial Aera vault to deposit token reserves. Third-party Guardians, like Gauntlet, submit proposed allocations across a set of approved assets to optimize treasury funds based on market conditions and a pre-set objective function. The vault then autonomously executes transactions after selecting the most effective submission.

Aera vaults can be programmed with specific strategies, such as providing liquidity on DEXs (through POL or Liquidity Mining), participating in yield farming, or lending, all of which aim to optimize returns and support the protocol's liquidity needs.

Vaults are autonomously rebalanced with the support of the Guardian, which leverages off-chain logic to power onchain rebalancing proposals. This supports vault objectives across various market scenarios and time horizons.

Protocol-Owned Liquidity (POL) with Aera

Aera facilitates POL strategies by enabling protocols (vault owners) to deploy their assets into customized liquidity vaults.

Guardian’s Role in POL

In the current V2 iteration of Aera, Gauntlet serves as the sole Guardian, leveraging its experience as an industry-leading risk manager. As Guardian, Gauntlet supports several functions, including:

• Rebalancing liquidity to maintain an active price range and adjusting as necessary.

• Dynamically updating the liquidity provided via Aera to a POL strategy to ensure target liquidity and user experience are met while minimizing opportunity cost.

• Monitoring LP positions and trading conditions for DeFi users, ensuring liquidity is effectively deployed to support user goals.

Using off-chain monitoring and logic, which is then executed onchain within Aera’s constrained action parameters, allows the Guardian to support risk-aware, responsive management of POL positions in a permissionless and non-custodial manner.

Methodology

1. Liquidity Provision: The protocol deploys a portion of its treasury, including its native tokens and a paired token (usually USDC or ETH), into an Aera vault.

2. Strategy Execution: The Aera vault automatically executes the strategy by depositing the native token/paired token into a liquidity pool. This action increases available liquidity, allowing protocol users to swap the native tokens with lower slippage.

3. Trading Fees: Liquidity providers earn a portion of the trading fees generated from the swaps deposited in the Aera vault.

4. Reinvestment and Growth: The fees collected can be reinvested in the liquidity pool to further increase liquidity or can be used to fund other strategic initiatives within the ecosystem.

5. Monitoring and Adjustment: Gauntlet, alongside the protocol, monitors liquidity depth, volume, and overall market response. Vault owners can (with Guardian support) adjust the target liquidity depths and strategy as needed to maintain a healthy ecosystem and ensure the stability of their native tokens.

Liquidity Mining with Aera

Aera integrates with DEX Liquidity Mining providers, enabling users to claim incentives that are parameterized using off-chain logic. As such, Aera operationally enables LPs to earn incentives in a decentralized and permissionless manner.

Liquidity Mining spend is automatically and continuously deployed to meet a protocol’s needs. Guardian-submitted transactions optimize spending to support objectives, powering budgets and pool allocations. This enables effective incentive management across various market conditions and scenarios.

Guardian's role in Liquidity Mining incentives

In the current V2 iteration of Aera, Gauntlet serves as the sole Guardian and leverages its experience as an incentives manager for protocols like Uniswap and Arbitrum.

As Guardian, Gauntlet oversees several functions, including:

• Setting overall incentive budgets to drive protocol goals.

• Determining optimal incentive allocation across allow-listed pools.

• Monitoring the impact of incentive spend on liquidity and users to ensure goals are maximally supported.

As with POL, the Guardian uses off-chain monitoring and logic, which is executed onchain within Aera’s constrained action parameters. This allows Guardians (such as Gauntlet) to support the optimization of incentive spend in a permissionless and non-custodial way.

Methodology

1. Instantiation: The protocol (vault owner) decides on a maximum budget for its incentives program and accordingly deploys its native tokens to Aera. If no incentive budget exists, the Guardian can support the development of an optimal one.

2. Deployment: The Guardian deploys capital to a pool to execute the vault strategy.

3. Monitoring and Optimization: The Guardian, alongside the protocol, will monitor the impact and progress of the incentives program over time, assessing how it impacts depth, volume, and other market responses. They adjust the target budgets and eligibility of incentives to maximize impact and minimize wasted spend.

Joint Optimization

Some protocols may consider running a joint strategy that combines Liquidity Mining incentives and POL. Aera can support dynamic allocation between the two — the protocol can specify a joint budget for POL and incentives to be used over a determined time period.

Guardian Role in Joint Optimization

Guardians can dynamically allocate a budget between incentive spend and POL to maximize user goals, depending on market conditions and the observed impact of both POL and Liquidity Mining.

Methodology

1. Initial Provision: The protocol deploys a portion of its treasury to balance POL against Liquidity Mining over a given period.

2. Strategy Execution: Guardians use off-chain logic to determine an initial proposed allocation between incentive spending, POL, and earning yield on unspent/used tokens.

3. Monitoring and Adjustment: Guardians submit proposed rebalancing transactions among POL, LM, and yield strategies, depending on hitting protocol objectives, in response to changing market conditions and observed impact of earlier instantiations of the program.

Onchain treasuries have a wealth of opportunities to enhance their treasury management through Aera. POL and Liquidity Mining strategies serve the important function of deepening onchain liquidity and driving protocol growth. Doing so with a keen eye for risk management is seamless through an Aera vault.

We invite you to reach out to us on social media or explore our website at aera.finance, if you want to learn more about Aera vaults and available treasury management strategies.

Aera Team