[Aave] LTIPP Application - FINAL

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: Aave Chan Initiative on behalf of Aave DAO

Project Name: Aave DAO

Project Description:

The Aave Protocol is the leading liquidity protocol of Decentralized Finance and the 2nd largest project in Arbitrum in terms of TVL, according to DefiLlama

Aave Protocol is the largest decentralized lending and borrowing platform in DeFi. It allows users to lend and borrow a variety of cryptocurrencies without the need for traditional intermediaries like banks. Users can deposit their crypto assets into liquidity pools, earning interest on their deposits. On the other hand, borrowers can take loans by using their crypto assets as collateral.

Team Members and Roles: [List team members and their roles/responsibilities]

The Aave Chan Initiative (ACI) as service provider for Aave DAO will be coordinating the grant application and usage. The ACI team is listed here.

  • Marc Zeller: Founder
  • 0xTogbe: Meta Governance Lead
  • XG17: Meta Governance
  • Alice RozenGarden - AIPs Dev
  • Josep Bove - Dev Lead
  • HazelStar - Lead Design & Operational
  • MartinGbz - Dev

In addition, the Aave DAO employs a range of service providers that are considered the top in the industry. This includes Avara, BGD Labs and Certora as technical service providers; Chaos Labs as risk service provider; Karpatkey and TokenLogic as finance service providers.

Project Links: [Enter Any Relevant Project Links (website, demo, github, twitter, etc.)]

Contact Information

Point of Contact (note: this should be an individual’s name, not the name of the protocol): [forum handle]

Telegram: Marc Zeller: @Lemiscate

Twitter: https://twitter.com/lemiscate

Aave Chan Twitter: http://twitter.com/aavechan

Email: marc@aavechan.com

Do you acknowledge that your team will be subject to a KYC requirement?:

Yes we acknowledge.

SECTION 2a: Team and Product Information

Provide details on your team’s past and current experience. Any details relating to past projects, recent achievements and any past experience utilizing incentives. Additionally, please provide further details on the state of your product, audience segments, and how you expect incentives to impact the product’s long-term growth and sustainability.

Team experience (Any relevant experience that may be useful in evaluating ability to ship, or execution with grant incentives. Please provide references knowledgeable about past work, where relevant. If you wish to do so privately, indicate that. [Optional, but recommended]):

Team experience (Any relevant experience that may be useful in evaluating ability to ship, or execution with grant incentives. Please provide references knowledgeable about past work, where relevant. If you wish to do so privately, indicate that. [Optional, but recommended]):

Established in the dawn of 2023, the ACI has rapidly emerged as a pivotal force driving innovation and progress within the Aave protocol. Our mission is rooted in amplifying the voices of individuals within the Aave DAO community and leading by example to catalyze positive change.

One of the key pillars of our initiative is our unwavering commitment to results. We believe that actions speak louder than words, and since our inception, we have consistently delivered tangible outcomes that contribute to the growth and enhancement of the Aave ecosystem.

Our team comprises seasoned professionals with a wealth of experience in the blockchain and decentralized finance (DeFi) space. Their diverse skill sets, coupled with a shared passion for advancing the Aave protocol, enable us to navigate the dynamic landscape of decentralized governance effectively.

ACI’s track record speaks for itself. Over the past year, we have successfully implemented over 50 AIP and ARFC.

These achievements underscore our ability to execute strategic plans and deliver value to the Aave community.

Moreover, ACI stands out for its proactive approach to community engagement. We actively seek input from Aave DAO members, fostering a collaborative environment where ideas flourish and consensus is achieved. This inclusive approach not only aligns with the principles of decentralized governance but also ensures that our initiatives are reflective of the community’s needs and aspirations.

The ACI has successfully managed various rounds of incentives and rewards programs for the Aave DAO, and does this free of charge as a service provider for the DAO.

Along with other service providers, ACI continues to keep Aave relevant and innovative with new programs like Merit (revenue airdrop to loyal Aave users) and Frontier (staking as a service). Simply put, the team at Aave DAO has an excellent track record and a clear ability to execute on this LTIPP grant plan.

What novelty or innovation does your product bring to Arbitrum?

Aave is the largest decentralized lending and borrowing platform on Arbitrum, allowing users to lend and borrow a variety of cryptocurrencies. It brings a Blue Chip DeFi protocol and one of the largest brand names in the space to the Arbitrum network and has been live since the early days of Arbitrum. Aave protocol’s trusted source of liquidity and feature set has allowed for further expansion of the entire Arbitrum ecosystem.

Cross-chain GHO’s launch on Arbitrum will bring a novel and innovative stablecoin mechanism to the network. The underlying infrastructure built on Chainlink’s CCIP is a new approach to managing such a stablecoin. With this grant, Arbitrum can be the clear network of choice for users at the launch of cross-chain GHO and the subsequent increase in activity that is expected.

Is your project composable with other projects on Arbitrum? If so, please explain:

Aave is totally composabile within the Arbitrum network, as users are able to leverage the benefits of Arbitrum’s scaling solutions while interacting with Aave and other DeFI projects on the same network.

Aave has onboarded a variety of assets on Arbitrum including ARB. It is also used by a number of other protocols for features like flash loans that improve liquidity on Arbitrum and the underlying lending and borrowing used by a number of protocols in the ecosystem.

Aave is actively working to include additional collateral assets that are unique to Arbitrum like GMX LP tokens. Aave is a proactive partner within the ecosystem and looks for synergies to deliver value to users. A recent example is the elimination of flash loan fees for Contango, Cian and Index Coop. Users on Arbitrum benefit from this activity.

Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?

Yes, other comparable protocols within the Arbitrum ecosystem are the following:

  1. Radian: TVL of 149,49M$
  2. Silo Finance: TVL of 87,98M$
  3. Compound V3: TVL of 79,41M$
  4. Unitus: TVL of 29,73M$
  5. Dolomite: TVL of 30,8M$

Data is from DefiLlama from 2024-03-04. Staking, Pool 2, Borrows, Double Counts, Liquid Staking and Vesting TVL has been excluded.

How do you measure and think about retention internally? (metrics, target KPIs)

As service provider for the DAO, ACI is tasked with growing and supporting the Aave protocol. As a result, ACI regularly reviews metrics and user activity to improve the protocol. Service providers such as Chaos Labs also take an active role in reviewing user metrics and potential impacts when making suggestions on risk parameter changes.

As Aave is a large protocol distributed across many chains and assets, clear reporting is a difficult task. As part of the Dolce Vita program, ACI is in the progress of consolidating and updating relevant user metrics for the protocol. This includes custom dashboards and updating public information sources like DeFi Llama. Where needed the ACI will create additional reporting to service the terms of this grant.

Relevant usage metrics - Please refer to the OBL relevant metrics chart. For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section:

General Metrics

Daily Active Users: A time series metric representing the daily count of unique addresses interacting with the protocol’s contracts.

Daily User Growth: A time series metric representing the daily user growth (in addresses) interacting with the protocol’s contracts.

See above.

Daily Transaction Count: A time series metric representing the daily number of transactions interacting with the protocol’s contracts.

Daily Protocol Fee: A time series data representing the daily total protocol fee generated. For example, swap fees, borrowing fees, etc., comprising all economic value generated through the protocol, contracts, apps, etc., by users.

Weekly fees on Arbitrum (source: DeFi Llama)

Daily Transaction Fee: time series, daily total transaction fees generated daily by interactions with the protocol’s contracts.

n/a

Daily ARB Expenditure and User Claims: Data on individual ARB incentive claim transactions made by users, as incentivized by the protocol. It should include the timestamp, user address, and the claimed ARB amount. The spent ARB will allow for the normalization of growth metrics.

Incentivized User List & Gini:

The list should include users incentivized by the protocol along with their performance metrics. For instance, if trading volume is incentivized, this would be a list of traders with their respective trading volumes. If liquidity providers are incentivized, it would include a list of LPs and their liquidities in USD. Protocols should also strive for more uniform engagement levels across a wide user base for long-term sustainability, which will be measured through a gini coefficient across reward recipients.

Aave is not currently running incentive programs on Arbitrum.

Lending Metrics

TVL: A daily time series expressed in USD, calculated as deposits minus borrows.

Aave Arbitrum TVL (source: DefiLlama)

Withdrawals: A daily time series expressed in USD for the amount of net withdrawals out of the protocol

See net inflows on all networks from DefiLlama.

Borrowed Amount: A daily time series measured in USD for each asset and in total.

83.27M$ in Borrow Volume

For last seven days, the borrowed amount has been the following:

  • Ethereum Mainnet: 518M$
  • Base: 5.07M$
  • Arbitrum: 83.27M$
  • Avalanche Network: 49.56M$
  • Optimism: 21.23M$
  • Polygon PoS: 129M$

Daily Borrowing Volume: A daily time series measured in USD for each asset and in total.

Borrowing vs TVL for all chains (source: DeFi Llama)

Weekly 200M$ in daily borrowing volume

  • Ethereum Mainnet: 518M$
  • Base: 5.07M$
  • Arbitrum: 83.27M$
  • Avalanche Network: 49.56M$
  • Optimism: 21.23M$
  • Polygon PoS: 129M$
  • Metis: N/A
  • Gnosis: N/A
  • BNB Chain: N/A
  • Scroll: N/A

Daily Deposits Volume: A daily time series, presented in USD for each asset and in total.

Weekly deposit volume in total is at 1,59B$

  • Ethereum Mainnet: 8.64B$
  • Base: 16.93M$
  • Arbitrum: 183M$
  • Avalanche Network: 94.67M$
  • Optimism: 46.01M$
  • Polygon PoS: 144M$

List of Depositors: A list of current and past participants who have deposited during the incentivized period to the protocol. The list should include depositor addresses, their current deposits in USD, time-weighted deposits in USD, and the duration of their deposit participation.

Block Analitica maintains a dashboard of information on the Aave protocol that includes a list of depositors.

List of Borrowers: A list of current and past participants who have borrowed from the protocol during the incentivized period. The list should include borrower addresses, their current borrowings in USD, time-weighted borrowings in USD, and the duration of their borrowing participation.

Block Analitica maintains a dashboard of information on the Aave protocol that includes a list of borrowers.

Utilization Ratio: Optimize the ratio of borrowed to available assets, indicating healthy demand and potential for higher interest revenue.

Utilization ratios can be seen and reviewed on the Aave front-end. In addition, service providers regularly review and update risk parameters and supply/borrow caps to maintain effective utilization ratios.

Loan Origination Volume: Track the volume of new loans created to measure growth and market penetration.

Block Analitica maintains a dashboard of information on the Aave protocol that includes loan origination information.

Default/Liquidations:

Minimize the rate of defaults to ensure platform trust and financial health.

Block Analitica maintains a dashboard of information on the Aave protocol that includes liquidation and vaule-at-risk information.

Liquidations are monitored by service providers and necessary adjustments proposed to the DAO.

Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan: [Yes/No]

Yes, agree.

Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest (Note: this does NOT disqualify an applicant):

No, ACI did not use a grants consultant or third parties. We will ask the Arbitrum and Aave communities for feedback on this proposal and make relevant updates.

SECTION 2b: 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?: [Yes/No, and provide explanation]

No, the protocol is not native to Arbitrum, but Aave was one of Arbitrum’s early adopters and supporters, and Arbitrum was among the “Day one” Networks for Aave V3, as you can check on dates (January 2022).

On what other networks is the protocol deployed?: [Yes/No, and provide chains]

The protocol is deployed in the following networks:

  • Ethereum Mainnet
  • Base
  • Arbitrum
  • Avalanche Network
  • Fantom
  • Harmony
  • Optimism
  • Polygon PoS
  • Metis
  • Gnosis
  • BNB Chain
  • Scroll

Deprecated Networks: Harmony, Fantom

What date did you deploy on Arbitrum mainnet?: [Date + transaction ID. If not yet live on mainnet, explain why.]

18/01/2022 Snapshot ended with positive result.

On 16th March 2022 Aave was deployed on Arbitrum.

Do you have a native token?: [Yes/No/Planned, link tokenomics docs]

Aave DAO has a native token, AAVE. You can get more information at:

Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?

Aave and partners are constantly incentivizing through liquidity mining and incentive programs.

A few examples are the following:

300k OP tokens were sent to Aave Grants DAO to help the distribution building on Optimism Ecosystem. The specific allocation was roughly two-thirds to builder rewards and one-third to events focused on the Optimism ecosystem.

An incentive program to earn OP LM rewards & wAVAX rewards, by suplying and borrowing on Aave V3 Optimism and Avalanche.

Proposals to allow Lido to distribute LDO rewards across the Aave v3 Ethereum, Arbitrum and Optimism Liquidity Pools

Current Incentivization: How are you currently incentivizing your protocol?

Aave is not implementing incentives directly, as various projects are handling Aave incentives through third-party management.

At the moment, Aave has the third parties managing incentives for both lending and borrowing in various markets. ACI also does this for partners free of charge as a service provider for the DAO.

Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program? [yes/no, please provide any details around how the funds were allocated and any relevant results/learnings(Note: this does NOT disqualify an applicant)]

No.

Protocol Performance: [Detail the past performance of the protocol and relevance, including any key metrics or achievements, dashboards, etc.]

Aave is the 2nd Largest protocol in Arbitrum with a current TVL of 366,24m$.

For more details, the most qualitative source of the ecosystem is DefiLlama.

As one of the largest protocols in DeFi, Aave’s performance speaks for itself. The Aave DAO has consistently been on the forefront of DeFi since the early days, and a supporter of the network effects enabled by on chain finance. As one of the largest liquidity sources on chain, Aave serves as a key integration for protocols large and small.

The protocol has continued to grow, expanding serviced assets, chains where Aave is deployed, and succesfully navigating multiple protocol upgrades. The expansion to a new product with GHO shows that the DAO continues to innovate. We expect that Native Arbitrum GHO launch and expansion with cross-chain GO will increase Aave TVL and metrics on Arbitrum.

Furthermore, Aave DAO is profitable, with revenues far in excess of current expenses. This allows the DAO to return value to DeFi with programs like Merit and Aave grants.

Protocol Roadmap: [Describe relevant roadmap details for your protocol or relevant products to your grant application. Include tangible milestones over the next 12 months.]

Aave works consitently to stay at the forefront of DeFi and react to markets as well as new assets. Relevant activities over the next 12 months include:

  • Expansion of GHO with higher borrow caps and Cross-Chain GHO, which will also be implemented on Arbitrum.
  • Adding collateral assets to improve diversity including Liquid Restaking Tokens like weETH and potentially other Arbitrum-native assets like GMX LP tokens.

Audit History & Security Vendors: [Provide historic audits and audit results. Do you have a bug bounty program? Please provide details around your security implementation including any advisors and vendors.]

Aave has been implemented with security as priority. The system has been designed to be safe and secure, and we have spent all the necessary resources in order to ensure that the protocol matches the highest security standards.

As the protocol continues to develop thanks to impressive work done by DAO contributors, with some notable innovations being V3 and GHO, it continues to be incredibly important that as much care is taken to ensure that users feel safe when using the protocol.

Therefore, Aave has a Bug Bounty Program on Immunefi. Immunefi is the leading bug bounty and security services platform for Web3, featuring the world’s largest Web3 security community and bug bounty programs. Immunefi guards many billions in users’ funds across projects like Wormhole, MakerDAO, Polygon, Chainlink, Lido, Stacks, Optimism, and many more. The company has prevented exploitation of vulnerabilities that put tens of billions of dollars at risk across hundreds of projects.

As recently as this year, Aave DAO governance processed a Bounty Payout with Immunefi.
Below are the links to all audit reports and formal verification for Aave V3.0.1

Security Incidents: [Has your protocol ever been exploited? If so, please describe what, when and how for ALL incidents as well as the remedies to solve and mitigate for future incidents]

No.

SECTION 3: 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: [Enter Amount of ARB Requested]

Aave DAO request 750k ARB.

Justification for the size of the grant [Enter explanation. More details are better, including how you arrived at the required funding for individual categories of expenses covered by your grant plan]

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.

Aave user base is vast and TVL one of the largest on Arbitrum. This grant amount is the minimum needed to make a relevant impact on metrics for Aave on Arbitrum. Borrowed amount is around 300,000,000$, and half of the grant amount will go to incentivizing borrows. This amount will also increase with the addition of GHO borrows which will also be incentivized. When annualized, the 375k ARB distributed over a 12 week period amounts to around 1% additional yield to users. While this could be higher, it will be meaningful enough to make ETH and GHO borrows sufficiently attractive to boost TVL and borrow metrics.

The additional 375k ARB will be used for GHO liquidity mining rewards. To target a sufficient size of GHO liquidity on the network, reward rates will need to be similar to mainnet. There the GHO Liquidity Committee has used a mix of incentives in the 10-30% range to keep GHO at peg. We expect that similar yield will be needed to manage the GHO peg on Arbitrum.

Together these two uses of the grant funds should make TVL and borrow demand on Arbitrum increase. Arbitrum will be one of the most attractive networks to borrow on Aave because of the borrow incentives. Arbitrum will be the most attractive L2 to borrow and use GHO when it goes cross-chain. The 750k ARB grant will ensure that both of these initiatives are a success.

Grant Matching: [Enter Amount of Matching Funds Provided - If Relevant]

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. However, the Merit rewards program is currently running for 90 days and will be up for renewal before June. If this grant request is approved, ACI will propose that $1.5m of Merit rewards be used to match the Arbitrum LTIPP grant in the same initiatives.

Grant Breakdown: [Please provide a high-level overview of the budget breakdown and planned use of funds]

Of the 750k ARB, half will be used to incentivize TVL and borrowing on Arbitrum and half will be used for liqudity mining for GHO on Arbitrum.

375k ARB will be used for Aave liquidity and borrowing incentives.

Half of the grant amount will go to incentives for WETH or stablecoin borrowers & GHO minters on Arbitrum. This will make increase borrow demand and improve profitability on the main activities in the protocol leading to an increase in TVL. LST/ETH actions are extremely popular in DeFi and Aave V3 E-mode allows for the most efficient leverage of LSTs on chain. Many users appreciate L2s for these actions as transaction fees on Mainnet makes these strategies costly. By lowering the borrow cost and improving economics for these activities, we can expect many more users to come to the network.

Liquidity mining for this portion of the grant will be managed by ACI and distributed through the Aave Emissions Manager module or through Merkle as with the Merit program.

375k ARB will be used for liquidity mining incentives for GHO.

Half of the grant amount will go towards incentivizing GHO liquidity to ensure a strong peg and profitable LPing for the launch of cross-chain GHO on Arbitrum.

GHO liquidity mining has been a success on mainnet, successfully restoring GHO to peg and providing LPs with impressive returns over the past few months. The overall program has been managed by the GHO Liquidity Committee (GLC). The GLC will manage incentives for GHO on Arbitrum, focusing on maintaining peg and incentivizing a wide range of pools. Similar to mainnet, the GLC will leverage various options and DEX protocols to efficiently distribute rewards and meet the committee goals of a strong and resiliant GHO peg.

Funding Address: [Enter the specific address where funds will be sent for grant recipients]

Aave Protocol Embassy multisig: 0xa9e777D56C0Ad861f6a03967E080e767ad8D39b6

This multisig currently holds the DAOs ARB tokens for voting and participating in governance. It will manage the distribution of incentives through Aave and distribution to GLC as needed to complete the funding and grant distribution.

Funding Address Characteristics: [Enter details on the status of the address; the eligible address must be a 2/3, 3/5 or similar setup multisig with unique signers and private keys securely stored (or an equivalent custody setup that is clearly stated). The multisig must be able to accept and interact with ERC-721s in order to accept the funding stream.

The Aave Protocol Embassy multisig is a 3/4 multisig with the following singers:

  • ACI (acting as the coordinator) : Delegate and service provider
  • Token Logic : Aave delegate and service provider
  • KarpatKey: Aave delegate and service provider
  • EzR3al : largest Aave delegate platform

Treasury Address: [Please list out ALL DAO wallets that hold ANY DAO funds]

Aave Collector contract governed and owned directly by the Aave DAO:

Aave: Treasury V3 | Address 0x053D55f9B5AF8694c503EB288a1B7E552f590710 | Arbiscan

Contract Address: [Enter any specific address that will be used to disburse funds for grant recipients]

Aave Collector contract governed and owned directly by the Aave DAO:

Aave: Treasury V3 | Address 0x053D55f9B5AF8694c503EB288a1B7E552f590710 | Arbiscan

SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES

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

Objectives: [Clearly state the primary objectives of the grant and what you intend to achieve]

The objectives of this program are twofold:

  1. Kickstart GHO as a native stablecoin asset on Arbitrum

Deploy and grow Native Arbitrum GHO, the native Stablecoin Asset of the Aave protocol, into the Arbitrum ecosystem and grow synergies with the Arbitrum ecosystem for V3 is another objective.

Aave aims to increase the number of natively minted stablecoins on Arbitrum. We want to contribute to building a robust liquidity base with other decentralized stablecoins that aren’t reliant on centralized actors.

Aave is in the process of launching Cross-Chain GHO which will allow users to borrow GHO at a fixed rate on various L2s. In order to have a successful launch on Arbitrum, this grant will be used in a mix of liquidity mining incentives to ensure deep liquidity and a solid peg for GHO’s launch on Arbitrum.

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

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.

  1. Grow retained users on Aave v3 Arbitrum

The grant will also be mobilized to focus on growth and retention of users for the Aave V3 Arbitrum deployment.

To be compliant with the Grant program requirement, grant funds will only be used to be deployed as incentives to supply LSTs & Arb to borrow wETH or stablecoins. These are the most used assets for supply and borrow on Aave v3, and incentivizing users to open these positions should lead to increased retention and a growing number of users of the protocol on Arbitrum.

Execution Strategy: [Describe the plan for executing including token distribution method (e.g. farming, staking, bonds, referral program, etc), what you are incentivizing, resources, products, use of funds, and risk management. This includes allocations for specific pools, eligible assets, products, etc.]

The 375k ARB for Aave liquidity mining and borrowing rewards will be managed by the ACI.

Incentives will be provided for both supply and borrow activities. Supply of LST and ARB tokens will be incentivized. Borrows of WETH, stablecoins and GHO will be incentivized. Through a combination of the Aave Emissions Manager and Merkle, ACI will manage rewards per the terms of the grant.

We will plan to do bi-weekly budgets of 62,500 ARB distributed to users undertaking the following user actions within the protocol:

  • Borrow GHO
  • Borrow ETH
  • Borrow USDC/USDT

For the first period of two weeks, we will plan to incentivize these actions equally. From there we will adjust incentives between the above actions in order to maximize growth and maintain the chosen KPIs. ARB tokens would be distributed to borrowers through the native Aave incentives mechanism or through a system like Merkle (which is being used for the current Merit rewards program). This would allow for either a liner distribution (Aave incentives mechanism) or flexible distribution (Merkle) in order to maximize success in meeting the chosen KPIs.

The 375k ARB for GHO liquidity mining rewards will be managed by the GLC.

Likely the GLC will incentivize a wide range of pools and protocols similar to the current strategy for GHO on mainnet that has distributed incentives on Curve, Balancer, Uniswap and Maverick. The grant incentives will be set to distribute over the 12-week period based on an assessment from the GLC at time of cross-chain GHO launch on Arbitrum.

The grant recipient is the Aave Collector, which can only be mobilized by AIP votes from the governance, the Aave DAO has elected the GLC and ACI as service providers to execute on governance actions for the DAO. Therefore a governance vote will be made to ratify and distribute the grant incentives, from which the relevant service providers will enact the execution strategy described.

At a high-level the breakdown of incentives distribition between the actions will be:

Grant Usage Amount (ARB) Actions Incentivized Distribution Method
Borrow Incentives 375,000 Borrowing GHO, Borrowing ETH, Borrowing stablecoins Bi-weekly, using Aave native incentive mechanism or Merkle
GHO Liquidity Mining (managed by GLC) 375,000 Providing liquidity for GHO on main Arbitrum DEXs Bi-weekly, adjusted by GLC using native DEX distribution mechanisms (ie Curve or Balancer gauge)

What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric? [Provide relevant design and implementation details]

Activity on Aave is highly sticky as it is non-trivial for users to migrate supply and borrow liquidity. Furthermore, we have seen GHO borrow activity is also sticky as the fixed borrow rate makes it attractive compared to borrowing other stables from the protocol. As a result, we think kickstarting profitable and sticky positions with users by incentivizing these activities will have long term benefits for user retention in the network.

Further, by improving profitability on Arbitrum, Aave DAO can continue distributing long term rewards through programs like Merit, where retained earnings are returned to the most loyal users of the protocol on Arbitrum.

Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy. [Please also justify why these specific KPIs will indicate that the grant has met its objective. Distribution of the grant itself should not be one of the KPIs.]

We will use a combination of user-focused and liquidity-focused KPIs to measure the success of our grant objectives. These include:

  1. Total Value Locked (TVL): The total value of assets deposited into the protocol. This is a common measure of the size and success of yield farming initiatives.
  2. Number of Users: The total number of unique addresses interacting with the protocol. This measures the spread and adoption of our protocol.
  3. Volume of Incentivized Transactions: The total value of transactions that are eligible for incentives. This measures the usage of our protocol.
  4. Number of Successful Incentive Claims: The number of users who have successfully claimed incentives. This measures the effectiveness of our incentive program.
  5. Increase in GHO supply on Arbitrum: The supply of GHO native or bridged to Arbitrum.
  6. Increase in stablecoin and wETH borrow: The change in borrow activity directly subsidized by the grants program.
  7. User retention: length of time a user has had a supply or borrow position on Aave.

We believe these KPIs strike a balance between user-centric and liquidity-focused metrics, offering a comprehensive view of our program’s success. The source of truth for these metrics will be our protocol’s smart contract data, which is publicly verifiable on the blockchain.

By tracking GHO borrows and supply size on Arbitrum, we can say whether we have met the first objective of this grant to grow cross-chain GHO on Arbitrum.

By showing an increase of TVL, borrow activity and user retention, we can say whether we have met the second objective of this grant to increase retained users on Arbitrum.

Grant Timeline and Milestones: [Describe the timeline for the grant, including ideal milestones with respective KPIs. Include at least one milestone that shows progress en route to a final outcome. Please justify the feasibility of these milestones.]

Grant incentives will run for 12 weeks from when liquidity mining incentives are started.

The program will be separated into three phases and set up.

Set up
Cross chain GHO will be launched and available on Arbitrum. Upon passage of this grant request, ACI will enact necessary Aave DAO governance votes to accept and distribute ARB.

Phase 1 (Weeks 1-4): In the initial phase, we will focus on setting up the liquidity mining and borrowing incentives. The expected KPIs for this phase include an increase in TVL and user numbers, as well as the successful distribution of incentives. We target >25% of GHO borrow cap on Arbitrum to be utilized. We will evaluate after phase 1 against target timeline and milestones to revise further phases as necessary.

Phase 2 (Weeks 5-8): In the second phase, we will continue to monitor the success of our incentives and make adjustments as needed. The expected KPIs for this phase include >50% utilization of the max GHO supply on Arbitrum, continued growth in TVL, user numbers, and incentivized transactions. We will evaluate after phase 2 against target timeline and milestones to revise further phases as necessary.

Phase 3 (Weeks 9-12): In the final phase, we will focus on maintaining the success of our incentives and preparing for the conclusion of the program. We will conduct a final evaluation of the program’s success and prepare a report on the results. The expected KPIs for this phase include a sustained increase in TVL, user numbers, incentivized transactions, >75% utilization of GHO supply on Arbitrum, and user retention.

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem? [Clearly explain how the inputs of your program justify the expected benefits to the DAO. Be very clear and tangible, and you must back up your claims with data]

  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: By promoting GHO activity, the grant will enable Aave’s 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. 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.
  4. Improved Borrow Economics: Incentives for borrowing GHO, stablecoins and WETH will make user borrow strategies more profitable. This will likely lead to a direct increase of collateral assets and borrows, growing total TVL of Arbitrum.

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/No]

Yes we do accept that.

SECTION 5: Data and Reporting

OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL. Along with this list, please answer the following:

Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?

Yes, team is prepared, ACI did several dashboard in the past for Aave DAO-related activities.

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard? [Please describe your strategy and capabilities for data/reporting]

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.

*First Offense: In the event that a project does not provide a bi-weekly update, they will be reminded by an involved party (council, advisor, or program manager). Upon this reminder, the project is given 72 hours to complete the requirement or their funding will be halted.

Second Offense: Discussion with an involved party (advisor, pm, council member) that will lead to understanding if funds should keep flowing or not.

Third Offense: Funding is halted permanently

Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.)

Yes we do agree on providing a final closeout report.

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?: [Y/N]

Yes we acknowledge it.

4 Likes

Hello @ACI ,

Thank you for your application! Your advisor will be @JoJo.

Please join the LTIPP discord and ping your advisor in the general chat so they can create a new channel and start communicating with you.

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Hello, small gm to the Arbitrum community,

as the @ACI account is new, I confirm this application is from the Aave Chan Initiative, an elected Service Provider of the Aave DAO and acting on behalf and for the benefit of the Aave DAO & the Arbitrum ecosystem.

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It’s honestly so frustrating to see Aave think they need over $10,400,00.00.

How many innovative dapps can that fund? What new things is Aave doing to bring NEW users? This $10m is just going to go to whales with 0 retention.

Top 10 protocols by TVL should be capped at a nominal amount, this doesnt encourage them at all to innovate if you keep funding these ridiculous requests.

It’s a bummer to see Aave applying for such a hefty grant. What’s the big deal with the protocol? You folks are practically everywhere on all chains!

Hi, EzR3aL here, delegate on Aave.

While I can see that some people in here think Aave shouldn’t apply this application will be used to help Arbitrum grow in terms of TVL. As you already said, Aave is deployed on many different chains and thus well-known. If someone wants to lend and borrow token, they probably mostly prefer Aave because of its known high security standard. So giving Aave, a well known brand such an amount, will help distributing it, fair and secure with the Arbitrum ecosystem. Especially bringing GHO, the native stablecoin, to Arbitrum offering a new experience in decentralized stablecoins and yield opportunity.

This $10m is just going to go to whales with 0 retention.

I would like to disagree here. In the end anyone who uses Aave like described by the ACI will be rewarded. And even if whales decide to squat it, these whales will bring in liquidity into Arbitrum and making borrow cheaper.

It’s a bummer to see Aave applying for such a hefty grant. What’s the big deal with the protocol? You folks are practically everywhere on all chains!

Like described above the main benefit will be security, GHO, TVL.
Also there are other big protocols applying for the grant.
In the end the DAO decides if it makes sense or not.

I hope to see you supporting Aave and if you do have any further questions feel free to ask them.
Have a great day

1 Like

Which “big protocol” is as greedy as you guys? Let me give you a few examples: Lido applied for 0.75, Pancake for 0.6m, Uniswap for 2.5m, Sushi for 3m.

Yes, you’re right, the DAO will decide, but I hope you don’t reduce the number. In my opinion, the great AAVE is eligible for even more. Go for 20m :slight_smile:

We have made a number of updates to our proposal based on feedback from our advisor and the community.

Changes:

  • Reduced grant request to 750k to align with the 12 week distribution period.
  • Updated grant objectives, milestones and timeline to give further details on the use of funds.
  • Clarified that the ACI will propose a matching distribution of rewards as part of the Merit program.
  • Updated information about the use and distribution of incentives as well as the associated KPis.

We welcome additional feedback from the community to improve our proposal ahead of the stated submission deadline.

2 Likes

Hi @cliffton.eth we have completed our application here and request you to change our permissions so we can update the title from Draft to Final as instructed in Discord. Thanks in advance!

1 Like

Hey there, I’ve amended the title to reflect that this is FINAL. All the best!

3 Likes

In addition to being the largest lending and borrowing platform in Arbitrum, Aave is an ideal candidate for LTIPP due to its contributions to the growth of Arbitrum, such as incorporating ARB, removing flash loan fees, and including additional collateral assets. It also makes GHO a cost-effective tool. Providing ARB with the ability to produce GHO will increase interest in Arbitrum. We also support Aave, despite the lack of innovation, because the grant will be used to increase the number of users for Aave V3 Arbitrum.