TL;DR
The SubDAO’s Aerodrome flywheel currently recompounds 100% of AERO emissions back into veAERO. This proposal codifies a standing rule to redirect 30% of weekly AERO harvest to USDC, held in the SubDAO reserve. The flywheel continues to grow. The DAO also builds a stablecoin buffer. No new multisig. No retainer. No CTX sold.
Background
Why the Aerodrome Flywheel Exists
In 2024, the DAO correctly pivoted away from single-sided DCA strategies (previously tested via Arrakis Pro) toward the Aerodrome flywheel: bribing for AERO emissions on CTX/USDC liquidity pools, accumulating veAERO, and compounding voting power over time. This approach was more capital-efficient and avoided the sustained sell pressure inherent in automated DCA.
What the Flywheel Does Not Do
Recompounding 100% of emissions into veAERO maximises future voting power but converts zero yield into stablecoins. The DAO’s USDC reserves are critically thin.
The Proposal
This proposal asks the DAO to ratify a single standing treasury rule:
70%
-
Recompound into veAERO
-
Flywheel continues to compound. Voting power keeps growing.
30%
-
Convert to USDC → SubDAO Reserve
-
Stablecoin buffer builds weekly. No CTX sold. No new infrastructure.
Additionally:
- 100% of trading fees already earned in stable-adjacent assets (USDC, ETH) flows directly to the SubDAO reserve without further conversion.
- The rule applies to all active Aerodrome positions managed by the SubDAO, current and future.
- The SubDAO retains discretion to temporarily suspend the 30% conversion during extreme market conditions (e.g. AERO price down >60% in a 7-day window) and resume once conditions normalise.
Implementation Mechanics
Current Flow
| Step | Action | Destination |
|---|---|---|
| 1 | SubDAO claims weekly AERO emissions from Aerodrome gauge | SubDAO wallet |
| 2 | 100% of AERO locked into veAERO | veAERO position (illiquid) |
| 3 | Trading fees claimed | SubDAO wallet |
| 4 | Ad-hoc decision on fee allocation | Varies |
Proposed Flow
| Step | Action | Destination |
|---|---|---|
| 1 | SubDAO claims weekly AERO emissions | SubDAO wallet |
| 2 | 70% of AERO locked into veAERO | veAERO position (flywheel preserved) |
| 3 | 30% of AERO swapped to USDC via Aerodrome stable pool | SubDAO USDC reserve |
| 4 | All trading fees claimed | SubDAO wallet |
| 5 | Fees in USDC / ETH transferred to SubDAO reserve | SubDAO USDC reserve |
Who Executes This
The SubDAO multisig signers execute the harvest and conversion as part of their existing weekly operations. No new contract deployments, no new external parties, no additional governance votes per transaction. The rule is set once here; execution is operational.
Swap Execution
The 30% AERO → USDC conversion will use Aerodrome’s native stable pool routing, which minimises slippage on the existing AERO/USDC pair.
Maximum slippage tolerance: 1%.
If slippage exceeds 1% at time of execution, the swap is deferred 24 hours and retried up to three times before the SubDAO may elect to hold AERO until conditions improve.
Financial Projections
Conservative Estimate
Based on current Aerodrome LP position (~$18K in CTX/USDC CL pool) and observed combined APR of 45.6%:
| Scenario | Annual AERO Yield on ~$18K LP | 30% Harvested | Est. USDC/Quarter |
|---|---|---|---|
| Bear (35% APR) | ~$6,300/yr in AERO | ~$1,8900/yr | ~$473 |
| Base (45% APR) | ~$8,100/yr in AERO | ~$2,430/yr | ~$608 |
| Bull (60% APR) | ~$10,800/yr in AERO | ~$3,240/yr | ~$810 |
If you also include rebases (~$52/week = ~$2,700/yr), the total AERO-denominated yield is
| Scenario | Annual AERO Yield on ~$18K LP | 30% of USDC/week | Est. USDC/Quarter |
|---|---|---|---|
| Bear | ~$140/week | ~$42/week | ~$546 |
| Base (current) | ~$173/week | ~$52/week | ~$675 |
| Bull | ~$220/week | ~$66/week | ~$858 |
At base case: roughly $675 USD/quarter from the harvest rule on current LP size. As the veAERO position compounds and LP size grow, this scales proportionally.
Why it Still Matters
- Every USDC that enters the reserve from yield is a USDC that does not need to come from CTX liquidation or external funding.
- The reserve builds passively, week over week, without requiring any additional governance action or contributor effort.
- It establishes a precedent: the DAO manages yield actively, not passively. That matters to institutional counterparties evaluating the project’s operational maturity.
What This Does NOT Change
| Item | Unchanged? | Notes |
|---|---|---|
| Aerodrome bribe strategy | Yes | Bribe amounts, timing, and target pools remain at SubDAO discretion |
| veAERO lock duration | Yes | Locking decisions remain unchanged |
| Liquidity pool composition | Yes | No change to CTX/USDC pool sizing or rebalancing |
| SubDAO multisig signers | Yes | No new signers, no new wallet required |
| Flywheel compounding rate | Slightly reduced | 70% vs 100% recompound — growth continues, just at ~70% the prior pace on yield reinvestment |
Risk Analysis
| Risk | Likelihood | Impact | Mitigation |
|---|---|---|---|
| AERO price drops sharply, reducing USDC yield | Medium | Low | Suspension clause: SubDAO may defer swap if slippage >1%. Bear scenario still produces positive USDC yield. |
| veAERO compounding grows more slowly | Certain (minor) | Low | The flywheel still grows at 70% of yield. Long-run voting power is slightly reduced, not eliminated. |
| SubDAO operational burden increases | Very Low | Very Low | One additional swap per week, automated via existing tooling. Estimated <30 min/week additional effort. |
| AERO liquidity on Aerodrome is insufficient for swap | Very Low | Low | AERO/USDC pool on Aerodrome is deep. 30% of weekly yield is a small fraction of daily volume. |
Success Metrics
The SubDAO will include a “Flywheel Optimization Report” section in its existing monthly transparency update, covering:
- AERO claimed in the period
- Amount recompounded (70%) vs converted (30%)
- USDC received from conversion and current SubDAO USDC reserve balance
- Any suspension events and reason
- Cumulative USDC added to reserve since rule inception
Target at Six Months
| Metric | Target (Base Case) |
|---|---|
| Cumulative USDC added to reserve from harvest | > $1,350 USDC |
| Number of weeks with successful harvest execution | > 20 of 26 weeks |
| Suspension events (slippage/market conditions) | < 3 |