[AAVE] [DRAFT] [STIP - Round 1]

Proposal edited to incorporate community Feedback, more details as part of replies of this thread

SECTION 1: APPLICANT INFORMATION

Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.

Applicant Name

Marc Zeller - Aave Chan Initiative on Behalf of the Aave DAO

Project Name

Aave DAO

Project Description

The Aave protocol is the leading liquidity protocol of Decentralized Finance and the 4th largest project in Arbitrum in terms of TVL.

Team Members and Qualifications

  • Marc Zeller - Founder
  • Alice RozenGarden - Governance Lead & Developer
  • Josep Bove - Dev Lead
  • HazelStar - Lead Designer

The ACI, as a service provider to the Aave DAO, supports the interests and is aligned with the Aave DAO.

Project Links

Contact Information

TG: @lemiscate

Twitter:

Email: marc@aavechan.com

Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?

Yes

SECTION 2: GRANT INFORMATION

Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.

Requested Grant Size

2M ARB

Grant Matching

The ACI will propose a matching budget for this grant to the Aave DAO. Being decentralized, the ACI can’t commit on behalf of the Aave DAO on an amount and specifics of this matching.

Grant Breakdown

  • 2M ARB WSTETH, ARB Supply, USDC Borrow & GHO minting incentives

Funding Address

Aave Collector contract governed and owned directly by the Aave DAO:
[Aave: Treasury V3 | Address 0x053D55f9B5AF8694c503EB288a1B7E552f590710 | Arbiscan]

Funding Address Characteristics

The Aave Collector (also known as Aave “treasury”) is a set of contracts governed by the Aave Governance V2 smart contract. The only way to access funds in the Aave treasury is by the enforcement of Governance on-chain vote by Aave token holders. No single entity can access funds in the Aave treasury.

Contract Address

Aave Collector contract governed and owned directly by the Aave DAO:
[Aave: Treasury V3 | Address 0x053D55f9B5AF8694c503EB288a1B7E552f590710 | Arbiscan]

SECTION 3: PROJECT OVERVIEW

Clearly outline the primary objectives of the project and the Key Performance Indicators (KPIs) used to measure success. This helps reviewers understand what the project aims to achieve and how progress will be assessed.

Objectives:

To be compliant with the Grant program requirement, grant funds will only be used to be deployed as incentives to supply LSTs & Arb on V3 and to Mint GHO & borrow wETH
The other objectives (such as gas & vote infrastructure program, AGD budget & others) will be achieved via the grant matching proposal with funds mobilized with the Aave DAO treasury.

Main objective:

  • Deploy and grow Native Arbitrum GHO, the native Stablecoin Asset of the Aave protocol, into the Arbitrum ecosystem & Grow synergies with the Arbitrum ecosystem for V3

Aave aims to increase the number of natively minted stablecoins on Arbitrum. Just like our friends from QiDAO, we want to contribute to building a robust liquidity base with other decentralized stablecoins that aren’t reliant on centralized actors.

This grant will enable Aave to kickstart and grow GHO liquidity outside of the Ethereum mainnet.

It’ll will also be mobilized to focus on growth of the Aave V3 Arbitrum deployment.

Arbitrum’s efficiency allows for use cases for a decentralized stablecoin beyond speculation and hedging positions. On Arbitrum, Aave aims to focus on more user-oriented use cases for GHO, positioning the stablecoin as a medium of exchange for both on-chain and off-chain services. We intend to enhance the ramp experiences, allowing users of all sizes to seamlessly onboard into Arbitrum.

GHO’s attractiveness will also encourage ARB token holders to use their ARB tokens as collateral
on Aave to mint GHO, incentivizing the holding and usage of ARB.

The GHO gas subsidy program will make GHO a stablecoin (within fair use limits) free to send and transfer on Arbitrum. In collaboration with Account Abstraction Wallets, this will be a cost-efficient tool to increase Arbitrum adoption.

The vote infrastructure support will allow Aave Arbitrum users to participate in governance in a trustless and gasless way to allow a more inclusive DAO.

The grant budget also empowers the ACI to dedicate BD efforts to enhance on & offramp support for GHO & Arbitrum in general, aiming to increase user adoption and reduce dependence on large centralized exchanges.

Key Performance Indicators (KPIs):

We will consider this grant a success if the GHO supply on Arbitrum reaches at least 10x the grant size after six months and 15x the grant size after a year. We’re confident that a well-designed incentive program will make this objective achievable.

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:

  1. Liquidity Boost: The grant will be instrumental in kickstarting and growing GHO liquidity on Arbitrum. A robust liquidity base is essential for asset adoption, and this grant will ensure that Arbitrum has a decentralized stablecoin base that isn’t reliant on centralized entities.
  2. User Onboarding: With Arbitrum’s efficiency and scalability, the grant will enable Aave to focus on user-centric use cases for GHO. We aim to enhance on-ramp experiences, allowing users of all sizes to seamlessly transition into the Arbitrum ecosystem. We are closely working with partners such as Holyheld & MtPelerin, among others, to achieve this goal. This collaboration will support the growth of Arbitrum’s user base and on-chain activity.
  3. Innovation in Use Cases: Beyond speculation and hedging, the grant will enable Aave to explore innovative use cases for decentralized stablecoins on Arbitrum. This includes using GHO as a medium of exchange for on-chain and off-chain services, expanding the utility, “real world” use cases, and reach of the stablecoin.
  4. Community Engagement: A portion of the grant will be allocated towards community initiatives via the Aave Grant DAO. This part of the grant will be reserved exclusively for builders working on Aave on Arbitrum, fostering the growth of Aave, Arbitrum, and new services native to the network.
  5. Collaborative Partnerships: The grant will facilitate collaborations with other projects and protocols within the Arbitrum ecosystem, such as QiDAO, Lido, Balancer, HolyHeld, GMX, and others.

Justification for the size of the grant:

The size of this grant ensures sustainable and long-lasting effects of grant strategies for the mutual benefit of both the Aave and Arbitrum ecosystems.

Execution Strategy:

While the grant recipient is the Aave Collector, which can only be mobilized by AIP votes from the governance, the Aave DAO is currently electing the GHO Liquidity Committee (GLC) composed of members from Tokenlogic, Aave Companies, ACI, Paladin, Balancer, and the community via the DeFi collective. The GLC will propose, on at least a monthly/bi-monthly basis, the execution and allocation of this grant among their other responsibilities and will translate that into AIP votes for governance decisions. They will balance the incentive’s scope and rate to ensure that incentives are used as efficiently as possible.

Grant Timeline:

Grants will be utilized within 3 months with a end of the program aiming at the end of Jan 2024.

Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?

Yes we do.

SECTION 4: PROTOCOL DETAILS

Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.

Is the Protocol Native to Arbitrum?:

No, but Aave was one of Arbitrum’s early adopters and supporters, and Arbitrum was among the “Day one” Networks for Aave V3.

On what other networks is the protocol deployed?:

Aave is currently deployed on:

  • Arbitrum
  • Ethereum Mainnet
  • Optimism
  • Polygon PoS
  • Avalanche Network
  • Base
  • Metis

Deprecated networks: Harmony, Fantom

What date did you deploy on Arbitrum?:

16th March 2022

Protocol Performance:

Aave is the 4th Largest protocol in Arbitrum with a current TVL of 147,44m$ according to DeFi llama. (source: DeFi llama)

We expect that Native Arbitrum GHO launch will increase Aave TVL and metrics on the network.

For more details, the most qualitative source of the ecosystem is defillama.com (Aave V3 on DeFi llama)

Audit History:

The Aave Protocol is known as one of the most audited codebases of the ecosystem with 9 different audits covering the V3 codebase.

Documentation related to audits can be found in the dedicated section of the documentation: Aave Security and Audits

SECTION 5: Data and Reporting

Provide details on how your team is equipped to provide data and reporting on grant distribution.

Is your team prepared to create Dune Dashboards for your incentive program?:

Yes we do, we did several dashboard in the past for Aave DAO-related activities, here’s the most recent ones:

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?

Yes, we’re fully ready to provide feedback on this and build the necessary dashboards to track grant results we will have the support of the GHO liquidity Committe GLC for this.

Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?:

We do acknowledge this.

7 Likes

All of the grants are aiming to end January 2024 and yo should change to that since this is a short term incentive program requirement.

And more serious:

  • 2.5M ARB GHO minting incentives and more mostly all around GHO… I think its asking too much, GHO has 20mm market cap, and 1mm volume per day. I feel its grabbing the hand of your brand Aave to ask a HUGE amount of money for something that seems not working out (check GHO peg) and that has near no usage.

I love Aave and i have a lot of money in it, but you are asking 4M ARB for GHO, where majority of usage of Aave is outside GHO (on lending and borrowing).
GHO doesnt exist on Arbitrum, in this case you should apply in these 2 categories:
Beacon Grants (<= 200K ARB)
o Recommendations:
 Live on Arbitrum for at least 2 months.
 Meets one of the following criteria:
 .> $1.5M TVL.
 .>$2M 30D cumulative Volume.

Siren Grants (Up to 750K ARB)
o Recommendations:
 Live on Arbitrum for at least 4 months.
 Meets one of the following criteria:
 .> $4M TVL.
 .>$40M 30D cumulative Volume.

But you are trying to take advantage of Aave numbers to push GHO. And the big usage of Aave that people use and would be benefitial for Arbitrum (lending and borrow of all your assets) has near 0 exposure in the proposal.

I dont like it at all.

4 Likes

Hello @MarcZeller thank you for submitting! Please make the following changes to your proposal to comply with the program rules.

  1. Your funding address must meet the following requirements.
  1. Please note the following rule regarding the expected timeline of the incentives program.

Unfortunately, your 12-month timeline does not meet these requirements.

  1. Grant funds may only be used to incentivize Arbitrum contracts and can not be used for “Support of DAO-funded via AIPs Arbitrum native features and projects”, “ARB Aave Grant DAO budget”, or “Vote infrastructure support allowing Aave Arbitrum users to participate in governance in a trustless and gasless way to allow a more inclusive DAO” or “Arbitrum native BD efforts by the ACI”
2 Likes

It has been noticed on the forum that some protocols believe they are entitled to a bigger slices of the cake simply because they are the largest players in the field. This type of dominant thinking does not foster equitable competition and innovation. Consequently, it is not in the best interest of the Arbitrum ecosystem which may be harmful.

3 Likes

Hi ser. Thanks for proposal.
Based on your statement, it is uncertain what you are trying to push, which could make it difficult for voters to make an informed decision in voting period which will happen October 5, 2023. And should remind you that the proposal cannot be changed during that voting period.
So it would be more beneficial to submit a matching budget proposal as quickly as possible so that voters have enough information to make an informed decision and ensure proposal approval.
Thanks.

1 Like

Never mind that GHO never holds peg. Its a disaster waiting to happen imo.

Again another protocol thinking they can have the farm. Far too much requested.

3 Likes

We all respect AAVE and its contribution to being one of the largest defi protocols.

However, this is not an appropiate application and is way too much of an ask for a non-native protocol.

In my opinion, this proposal is entirely about generating liquidity and growth for AAVE’s new stable (not even the platform itself), which is new to Arbitrum and also relatively new in general, as only being a few months old.

This does not focus on bringing new value into the Arbitrum ecosystem, or expanding the growth of other ecosystem protocols. This is solely focused on GHO, which by itself does not add value to Arbitrum.

The amount should be reduced significantly and the application should be focused on how it drives value and growth to Arbitrum, not just GHO.

6 Likes

I think it’s great we are having gho coming to arbitrum, but there is an issue with its Peg. To become a trustworth stable i think it’s necessary it regains it peg, we have all seen that depegged stables don’t do really well in any markets. So I think this has to be addressed.

Cant take a view on this as the proposal is still outlined as a 12 month execution strategy.

GHO remains off peg and not providing any level of confidence to users whilst remaining off peg.

Incentives put towards GHO, whilst off peg, is a questionable use for the DAO. Why should incentives be used to prop something up?

Arbitrum has very strong native lending protocols, namely Radiant and Lodestar and both make for compelling cases to receive incentives.

Does Arbitrum really need Aave and GHO and if so, should Aave be granted more than Radiant and Lodestar?

1 Like

This deviation stems from insufficient demand and the absence of a formal redemption mechanism, prompting stablecoin researchers to underscore the necessity of an arbitrage mechanism for demand creation and peg restoration. Aave’s founder, Stani Kulechov, defends GHO, emphasizing that the focus on the peg is a secondary concern, and forthcoming improvements, including the GHO Stability Module, will rectify the situation.

The Stability Module facilitates GHO minting using stablecoins as collateral, presenting an arbitrage opportunity.

Despite the de-peg, Kulechov highlights GHO’s borrowing advantages, competitive borrowing costs, and liquidity benefits. Aave Companies is actively developing initiatives like the GHO Stability Module to reinstate the token’s peg.

This scenario illuminates the challenges confronting new DeFi-native stablecoins like GHO in establishing use cases and achieving product-market fit within a market dominated by established stablecoins such as USDC, USDT, and DAI. In response, strategies for quant traders and venture capitalists to capitalize on this situation include:

  1. Collaboration with DeFi Projects: Explore collaborations with other DeFi projects and protocols to integrate GHO into their platforms, including liquidity pools, lending protocols, and decentralized exchanges.
  2. Incentivization Programs: Introduce liquidity mining programs or yield farming incentives for users providing liquidity for GHO. This strategy aims to attract liquidity providers and boost trading volumes.
  3. Integration with DeFi Services: Position GHO as an integral component of various decentralized finance services, such as lending, borrowing, and decentralized exchanges. Integration with popular DeFi platforms enhances the potential for increased demand.
  4. Diversification of Use Cases: Develop additional use cases for GHO beyond being a stablecoin. This could involve integration into decentralized applications, decentralized finance products, or utilization as collateral for loans.
  5. Stability Mechanism Utilization: Leverage effective stability mechanisms, such as the GHO Stability Module, to incentivize users to maintain the peg. This presents an opportunity for traders and investors to capitalize on arbitrage opportunities.
  6. Community Engagement Opportunities: Engage actively with the crypto community, both online and offline, to gather feedback and suggestions. Community involvement can translate into organic growth and enhanced market perception.
  7. Regulatory Compliance Assurance: Ensure compliance with relevant regulations to build trust among users and attract institutional investors. Regulatory adherence can enhance GHO’s reputation and appeal.
  8. Technical Improvement Investment: Consider investment in GHO’s technical enhancements, addressing any issues or concerns to ensure the stablecoin is user-friendly, secure, and efficient.
  9. Strategic Collaborations Exploration: Explore strategic collaborations with existing stablecoins or DeFi projects to create synergies, fostering mutual benefits and attracting a broader user base. . As potential MICA ready product for both insttutional CBDC users and retail. GHO may or have the can bring bizness to bizness and retail users in the entire Arbitrum ecosystem and beyond , L2 , nova and bridges. I hope @MarcZeller we can achieve this.
1 Like

To keep it brief.

Aave is a strong player in the DeFi Space, however, in its current state, I don’t see this proposal worth passing due to the following reasons:

  • Grant timeline is incorrect according to the aim of STIP
    • All ARB incentives should be utilised by the end of Jan 2024.
  • Remove the following due to being incompatible with STIP and its aims
    • 75k Vote infrastructure support allowing Aave Arbitrum users to participate in governance in a trustless and gasless way to allow a more inclusive DAO.
    • 75k ARB GHO grant for Onramp & Offramp Arbitrum native GHO support & Arbitrum native BD efforts by the ACI
    • 900k Support of DAO-funded via AIPs Arbitrum native features and projects
    • 300k ARB Aave Grant DAO budget
  • Reduce the 2.5M ARB GHO minting incentives to a more feasible number and place a larger focus on the utilisation of Aave rather than GHO
    • This would also enable other grants to get accepted within the arb ecosystem as way over 50M arb has been requested from protocols.

Finally, has Aave DAO matched incentives for previous grants they have received for other L2s?

If this feedback is incorporated and the grant request adheres to the STIP guidelines, then I can see grant proposal being much more digestible to delegates.

2 Likes

Firstly, thank you for your proposal and for being an early and supportive member of the Arbitrum ecosystem. Aave’s protocol holds an esteemed place in the DeFi world and aligns well with Arbitrum, already being our primary money market and fourth-largest in terms of TVL. The proposal focuses on boosting GHO, Aave’s decentralized stablecoin, within the Arbitrum ecosystem. With a grant request of 4M ARB—representing 8% of the total 50M ARB grant pool—we appreciate the detailed allocation plan. However, we have a few concerns that need to be addressed before we can fully support this initiative.

Major Concerns

GHO’s Track Record and Peg Stability

  • GHO is still largely experimental and hasn’t found its product-market fit, struggling to maintain a stable peg.
  • No empirical evidence provided to support its potential success within Arbitrum.
  • Our recommendation for change: Reallocate some of the proposed grant towards more established features of the Aave protocol that could bring immediate value to Arbitrum’s ecosystem.

Lack of Detailed Success Metrics

  • The proposal mentions scaling GHO supply but doesn’t specify other success metrics.
  • Our recommendation for change: Provide a more detailed set of KPIs to measure the success of the grant’s initiatives.

Incorrect Timeline

  • Our recommendation for change: Reduce from 12 to 3 months along with the proportionate reduction of ARB requested.

Minor Concerns

  • The grant size justification is somewhat vague.
  • The proposal could benefit from a clearer distribution plan.
  • Our recommendation for change: Include detailed calculations or projections to justify the grant size and a clearer breakdown of the distribution plan.

Summary

Castle Capital values the robust offerings that Aave brings to the Arbitrum ecosystem. However, in its current form, we can’t support the proposal without reservations. Specifically, we believe that the focus on GHO may not be the most effective use of a sizable grant at this stage. Our suggestions include reallocating some resources to more immediate needs and providing clearer success metrics and justifications.

We hope our feedback will be taken in the constructive spirit it is offered and will help to refine your proposal for the benefit of the broader Arbitrum community.

2 Likes

AAVE team just never showed up to comment on all the feedbacks and change their proposal, really sad since they are a big actor on Arbitrum!!
They didnt changed anything and the tittle its still in DRAFT, the period to change things ended yesterday so its a NO go for voting AAVE proposal.

Lets hope AAVE team can bring a better proposal next time.

1 Like

Hello, we would like to thank everyone for their feedback and participating in this discussion

the proposal overall budget and timeframe has been update, we will answer to feedback:

The Grant has been rebalanced to support outside of GHO Aave V3 arbitrum users:

  • LM program for wsETH & ARB supply, incentives for WETH, USDC borrowers & GHO minters
    LST/ETH actions are extremely popular in DeFi and Aave V3 emode allows for the most efficient leverage of LSTs onchain. Many users appreciate L2s for these actions as transactions fees on Mainnet makes these strategies costly.

We appreciate this feedback and will update during the day the proposal to add more details

We appreciate this Feedback but Aave being decentralized, this plan will be detailed by the GLC and the ACI has no role in detailing on their behalf to the token the distribution plan, the track record & reputation of the members of the GLC should be indicative of their ability to allocate these funds efficiently.

The proposal has been updated to be compressed top a period of 3 months to be compliant with the program

non-compliant parts of the grant application have been removed and the overall grant request has been reduced from 4M to 2M ARB.

Be we still believe that what we wanted to do add value to both ecosystem, removed actions will be proposed to be founded on the Aave DAO side via a AIP to achieve those objective and be part of a matching program.

2 Likes

no doubt Aave is one of the best Lending and borrowing platform :+1: :+1: :+1: :+1: