Answering topic by topic here to make it easier to follow:
Regarding the legacy ParaSwap adapters
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There wasn’t really a precedent or expectation for regarding the positive slippage between the Aave Labs and Aave DAO as first it was mainly a product feature we wanted from the Aave Labs to enable on our product, and this is why we developed the first iterations of the swap adapters in the first place ourselves.
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Indeed, we did set the surplus to go to Aave DAO treasury because we didn’t have the ability to collect it for different reasons but mainly due to regulatory uncertainty at the time. Thus we made the decision that it’s actually better to just provide this windfall to the DAO, for now, as there was also uncertainty as to whether these swap adapters would be a long-term solution for the Aave Labs product (not going into the technical details here). The windfall has been approximately 50-75k per month.
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Given that we moved away from this solution in our product we started to invest into building new adapters and integration with Cowswap since a lot of the users were interested in the MEV protection it provides, these ParaSwap adapters became legacy for us.
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It is definitely certain that we do want to monetize the Cowswap adapters in the hope that it will sufficiently fund the Aave Labs application, so it can provide the safest experience for users accessing the Aave protocol. This doesn’t need to be funded by the DAO and neither the DAO should take this venture risk.
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Regarding the point on whether Cowswap is a better experience to users or not, it’s purely an Aave Labs product decision to make, not the DAOs, since it’s an opinionated product of Aave Labs. We of course do have confidence that the integration provides a better experience. Overall we do believe that MEV protection is great for the users that Cowswap provides out of the box.
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On the topic of flashloans : we only deployed the Adapters with Aave FlashLoan Factory, not the Balancer one, and so on any actions on Adapters that requires a Flashloan we enforce it’s an Aave v3 Flashloan and no other source (Just use Aave).
Regarding the application, development and funding
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While we don’t want the Aave DAO to pay for the application development or fund anyone else’s business except what is protocol development, we do incur significant costs that not only relates to development but also customer support, product, answering different regulatory enquiries etc. We took the approach that instead of monetizing the protocol related activity, we simply build features around the product that result in better retention and engagement with the protocol to monetize the non-protocol features (not the protocol itself) while keeping access to the protocol extremely competitive and safe.
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Regarding the request from the DAO to support certain assets and changes from the DAO, we typically have a dedicated team for this and we integrate what is baseline for the users while keeping the opinionated approach (i.e. design, ux, messaging etc), even when these requests come in a really short term notice (which we also gave feedback to ACI). Especially time consuming are the internal security processes to ensure anything changed on the app, needs to be secure (we don’t want to risk another Safe/ByBit issue).
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We do think this is the right approach that the DAO should not take venture risk, neither should pay for the application development and this should be on the shoulders of those who build these products.
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And also building a safe and secure product is in line with the DAO’s expectations to see the protocol grow and ensure the stickiness of the protocol by building features into the app that might not relate to the protocol itself.
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The ACI team always was aware that the interface had been owned by the Aave Labs team (as stated on the repo and acknowledged in the governance forum by Marc and others multiple times) and this hasn’t been a problem before over the years.
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I don’t believe that this has to do anything with privatization, in fact, what we are talking about is purely about Aave Labs own product, not something that is on the protocol layer at all. If everyone’s who builds an application or integrates Aave Protocol would need to pay for all their monetization that are not related to the Aave Protocol, simply because they integrate Aave Protocol in one part of their product, I wouldn’t see motivation for anyone to do so, and also it questions the permissionless nature to build on top of Aave.
There are some direct questions as well that I will provide direct answers:
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Aave Vault is simply a 4626 vault wrapper built by Aave Labs and funded by Aave Labs that allows revenue share (and allows set fees to zero as well). This is simply a product build on top of the Aave Protocol that doesn’t affect the existing protocol monetization itself. There are also already open source vaults that can be used, such as one made by BGD Labs. Neither this vault is needed for Aave V4 (not sure why it would) as users can interact directly with Aave V4 via Hubs, similar to Aave V3 markets today. Although we do see value in building vault systems on top of Aave V4 as value added products but third parties.
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Aave Labs received an integration grant for building these adapters in the first place and also for integrating into the Aave Labs application and that grant helped to justify using Cowswap and spending our own resources to integrate. This is the sole product decision that relates to Aave Labs and doesn’t affect the protocol in any way. We also consider that CowSwap is the best product in this category out there.
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While not related to this topic, Horizon is an instance managed by Aave Labs and its simply up to Aave Labs to decide how to manage the instance as long as it provides revenue for the DAO (this is how white labeling works) as per the proposal voted by the Aave DAO. Also zero Aave DAO incentives has been used so far. Instead Horizon made 100k revenue while still early in few months in and half of that is already accumulated to the Aave DAO. Also if the Aave DAO supplies GHO and sees better opportunities, the Aave DAO can always redirect the GHO, this is Aave finance decision to take at any point. We’re quite proud of Horizon becoming the largest RWA beating all the competition and scaling it to 600M without any DAO incentives so far. This is remarkable.
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The Aave V3 liquidation engine works fine as of today, and the Aave V4 liquidation engine is a vast improvement to the existing V3, ensuring that users have a better experience on liquidations. More on the Aave V4 liquidation engine here. Any sort of additional fee the DAO wants to capture can be set by configuration if the DAO decides so. We agree that the Aave V3 is the best protocol out there live, we contributed to this.
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Aave Labs owns the Aave trademark, this has been the case for over 8 years and we also actively defend the trademark from any kind of scammers or phishing attempts online, which is a normal and important part of the work to protect the users. Aave DAO in fact can’t own anything. It’s not a legal person, it’s a real DAO that governs the smart contracts of the Aave Protocol.
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Regarding the point of sGHO. sGHO can be integrated in a fully permissionless way by any product at the moment. For example, OKX integrated sGHO into their wallet today (Big kudos to @TokenLogic for landing this integration). But overall, I don’t believe this is a question of subisdizing someone particularly, if there is too high a rate on sGHO, it should be the DAO’s decision to reduce that, of course that affects all integrators like Okx and ByBit (and also integrated in the existing Aave web interface) etc. This permissionless nature is exactly what’s needed to gain adoption, otherwise it would be harder to see any growth or appeal of using permissioned systems in regards to sGHO. I personally, prefer to integrate sGHO into our products because it creates more alignment and growth for GHO, Aave’s native stable coin, as a savings system (and competes with sUSDS), which overall should be good for GHO.
The claims about Aave breaching fiduciary responsibilities are nonsense, especially as we actually work day and night to ensure that Aave Protocol is paved with innovation, maintains competitive advantage, and Aave Labs has products that make is safe to access the protocol, enabling billions worth of volume into the Aave Protocol without having any major issues over the past 8 years. Especially as a $AAVE token holder and core contributors, we are fully aligned to grow the protocol, and build products that grow the protocol or increase user retention and this of course means building products that grow the protocol.