Expanding…with caution

Auxo DAO seeks to overcome the issue of dilution that many capital allocators have to contend with when seeking yield. This is achieved through the token's strictly controlled policy of expansion and the absence of any mechanism of inflation versus the net asset value (NAV) of the treasury.

Governance-gated minting

It is only possible to mint new tokens with the inflow of new capital in the treasury at NAV value through a mechanism known as bonding. The process is subject to governance approval. This ensures that previous holders are not diluted by newcomers joining the DAO.

DAO-owned Liquidity

The AUXO token represents a share of the Auxo DAO treasury, which besides other assets owns the AUXO liquidity pools. This means that the DAO is not attempting to incentivize greater degrees of liquidity provision, as is often the case with other DAO tokens with dilutive tokenomics.

The DAO opts for a protocol-owned liquidity and market-making model. The Net Asset Value for AUXO will be calculated as the total assets held by the protocol divided by the total AUXO supply.

| NAV = Assets / Total_AUXO_Supply

Assets held in the treasury include liquid and illiquid assets, as well as the ETH side of AUXO-ETH pairs where the treasury provides liquidity. The valuation of the assets follows a 7-day TWAP, with the price of liquid assets being recorded for TWAP computation every day at the market open.

Liquidity Pool Management

At Auxo DAO, one of the main goals is to provide yield to stakers without the risk of dilution. The team has achieved this through various methods, including protocol-owned liquidity (POL).

No Incentives

Unlike other DAO tokens that incentivize liquidity provision through dilutive tokenomics, Auxo DAO owns the vast majority of its liquidity. This ensures that the fair valuation of the AUXO token aligns with its net asset value (NAV), with the initial price set at exactly NAV when launching the AUXO-ETH pool.

Seeking Capital Efficiency

To increase capital efficiency, the AUXO-ETH liquidity will be deployed using a series of Uniswap V3 ranges, with market-making operations conducted to facilitate the price trading at a slight premium with respect to NAV.

The protocol will deploy a base layer of liquidity on a range defined by upper and lower bounds, determined by treasury operators to be a certain factor of NAV. In addition, the treasury will deploy liquidity in sub-ranges to work as support and resistance to the price, ensuring convergence towards healthy price action.

Pool parameters will remain unchanged for NAV % changes that stay within plus or minus 10%, but will be updated when NAV increases or decreases more than 10% and maintains valuation for a minimum of two consecutive days. Additionally, pool parameters will be revised and changed at least once a month.