SIP-X / BIP-X: Approve gauge for Saddle baoUSD/FRAXBP pool and BAO <> SDL treasury swap

Summary

This proposal is posted on both Saddle and Bao governance forums for both communities to vote on. It intends to solidify the relationship between Saddle finance and BAO Finance and strengthen both protocols by simultaneously creating deeper liquidity on the Saddle DEX and for Bao’s synthetics.

To achieve this, it is initially proposed that each protocol will create a gauge on its own platform for the new baoUSD/FRAXBP pool on Saddle Finance

In addition, 1m SDL tokens will be swapped for 1m BAOv2 tokens, which have an approximately similar market value at the time of writing (around $6k). The Saddle and Bao teams will also have the option of another similar sized swap within the next 3 months that may or may not be implemented at the discretion of both teams.

The tokens will be max locked for 4 years on their respective platforms.

Saddle will use their veBAO voting power to vote on Bao Finance gauges however they choose, share in the protocols revenue and earn a boost to liquidity rewards for any liquidity they choose to deposit. Bao will do the same with their veSDL.

Abstract

Bao’s and Saddle’s protocols can complement each other because BAO is a synthetic liquidity layer and Saddle are an exchange layer. Both need liquidity to be successful. By working together on this liquidity, both projects can increase their chances of success in these highly competitive markets.

Bao’s first synthetic is baoUSD, a USD-pegged token It is over-collateralized by debt positions and other stablecoins via its stability module. baoUSD has a focus on security and decentralization over everything else - after all, the whole point of a stablecoin is to remove volatility and risk. This is demonstrated by choosing only the safest collaterals and other innovations like the IMF, which reduces collateral factors for larger positions.

You can read more about the design of baoUSD in this medium article The Stablecoin Trilemma and baoUSD | by chickn bao | Baommunity | Dec, 2022 | Medium

or in the Bao Finance docs: https://info.bao.finance/docs/franchises/bao-markets-hard-synths

If approved by the Bao and Saddle community, Saddle would be the first external project to receive a gauge on the BAO platform, so it is likely to receive considerable support from the BAO community and receive future gauges for other synthetic tokens

Motivation

The passing of this SIP/BIP will allow Saddle to form a bonding relationship with BAO, a growing synthetic liquidity protocol and boost its own TVL in the process.

By including a gauge on both platforms, both communities will benefit from the support of each other. By swapping tokens, it is possible to put to work tokens that would otherwise be difficult to use without increasing sell pressure and ensure that both projects can start with a gauge weight that makes adding liquidity attractive on each other’s platforms.

Specification

Saddle will deploy a gauge to Ethereum main net for the baoUSD-FRAXBP liquidity pool . BAO will deploy a similar gauge on Bao Finance - Deliciously wrapped finance!

Swap 1m SDL tokens for 1m BAOv2 tokens; both parties will max lock for 4 years. Option of swapping up to an additional 1m tokens in the next 3 months.

For a minimum of 8 weeks Bao will seed at least $50k liquidity to the baoUSD-FRAXBP gauge and use SDL rewards to max lock in veSDL to increase the gauge weight over time.