Aave Protocol Token Addition - Community Sentiment Poll

After the success of AIP-1 and already more than a third of the LEND supply upgraded to the AAVE asset, the community governance can now focus on the next improvement for the Aave Protocol.
This topic focuses on new asset additions to the main Aave Market that have been debated in other threads.

The most efficient way to host constructive debates and gather feedback on community sentiment is to narrow the discussion focus on reasonably sized batches of assets.
This first batch is composed of 3 assets: AAVE, UNI and GUSD. The other assets currently discussed in the governance forum will have their time to shine in the following batches.

AAVE

The first asset is AAVE, the center of gravity of the Aave Protocol governance.
The AAVE asset is fairly new, but already has a decent amount of decentralized liquidity in Uniswap, Balancer, and Sushiswap with clear CeFi Announcements of migration support and AAVE listing such as on Binance (Blogpost)

The addition of the token AAVE into the main market will allow the creation of an end -> aAAVE “collateral swap” feature, allowing current aLEND holders to migrate without being forced to close their current position.
There’s currently 187M aLEND in the Aave Protocol, ~15% of the total supply.
The recommendation of the Risk team would be to keep the LEND risk parameters:

LTV Liquidation threshold Liquidation Bonus
50% 65% 10%

UNI

UNI is the governance token of Uniswap Protocol, the DEX with the highest volume. It was distributed to users and liquidity providers gathering a diverse crowd of governors. The Uniswap DAO is now the DAO with the highest value under management.
UNI is supported by the platform Compound with a 65% collateral factor.
Given the short existence of UNI on the market and the current volatility,
the Risk team recommends a slightly more conservative set of parameters:

LTV Liquidation threshold Liquidation Bonus
40% 65% 15%

Please consider the details of the Risk team’s opinion below :

UNI Smart Contract Risk: B-
The UNI token is audited and has been impressively battle-tested, with nearly 800k transactions for such a short life of 21 days. The smart contract uses some of COMP’s token code which has been tested by the markets.

UNI Counterparty Risk: B+
UNI is a permissionless token launched in some of the fairest ways witnessed. The Uniswap team, which has an impressive track record, will be giving up power over the protocol gradually over the next 6 months.

UNI Market Risk: B-
The UNI token has been really well received by the community. The price quickly increased from nothing to around $3, leading to high volatility but also growing the market capitalization.

GUSD

GUSD is issued by Gemini Trust Company. It has been created for practical use in innovative applications, which facilitate Gemini’s institutional solutions and exchange operations.
GUSD addition would create more bridges between CeFi and DeFi and can be one more step towards successful synergies between the Aave community and the Gemini ecosystem, especially with features such as Credit Delegation.

Being a Centralized Asset with an emerging presence in the DeFi ecosystem, the recommended risk parameters are to allow GUSD as a borrowable currency, but not as collateral.

Please consider the following Risk team opinion about GUSD below:

GUSD Smart contract Risk: C-
GUSD was launched in September 2018 – at the same time as USDC – yet it has just under 100k blockchain transactions. The token is mostly used within the centralized Gemini environment.

GUSD Counterparty Risk: B- cannot use as collateral
As it is backed by real US dollars, GUSD is centralized. An independent accountant’s audit report is published at the end of each month on the website. Furthermore, GUSD is regulated bringing trust to the token. Still, the infrastructure is based on the Ethereum blockchain where regulators have little power.

GUSD Market Risk: B
GUSD has a small market capitalization of $11m with one of the smallest trading volumes among stablecoins. It is backed by real USD and has managed to keep its peg well showing little volatility.


The poll in this thread is a community sentiment poll in order to centralize the opinions of the community and easily identify strong support or opposition about an asset.

Feel free to express your voice by voting and feel free to express your constructive opinion in this thread.

Community sentiment on Assets
  • AAVE - Yae
  • AAVE - Nay
  • UNI - Yae
  • UNI - Nay
  • GUSD - Yae
  • GUSD - Nay

0 voters

10 Likes

My understanding is that GUSD can be used as collateral the same way any other ERC20 token can. GUSD is centralized in the fact that it is guaranteed to be redeemable for $1 at Gemini and the audit report just shows that there is a corresponding amount of USD held in a bank for all outstanding GUSD.

3 Likes

Looks like there are only 11m GUSD on-chain: https://etherscan.io/token/0x056fd409e1d7a124bd7017459dfea2f387b6d5cd

The proposal says the market capitalization is $200m. Am I missing something?

I think you’re right; it’s about $11.7M at the moment [sources: Etherscan, CoinMarketCap, Coinbase]. I’m a bit confused by the $200M figure cited above too. Good catch!

You’re Right, It was a typo, I’ve edited the post, Thanks for the report!

1 Like

When it’s time to vote on-chain, can stkAave vote for this proposal?

2 Likes

Yes I think GUSD is redeemable for USD in Gemini and USD can be traded to ETH for example, which is good for liquidators since that ensures liquidity in case of collateral calls.

2 Likes

Could stkAave be used as collateral also ?

2 Likes

@cotchon, @GuyFawkes

Staked Aave (StkAave) present another risk profile than AAVE, if you wish to initiate the discussion about having StkAave in an upcoming batch of potential assets, please consider starting a dedicated thread discussion.

6 Likes

My question was about being able to vote on adding UNI, AAVE, GUSD on-chain with StkAAAVE. Since many AAVE holders are currently staking. I’m NOT suggesting adding StkAAAVE as collateral…

Unless adding these assets does not require an on-chain vote, then my question is moot.

I’d love to add all three, but my question is:

Is GUSD worth adding in regards to the additional gas cost? With a cap of 11M$, we could potentially be hurting most of our users.

The question is: How much of an impact on gas costs will adding these assets to the original Aave market have?

@Zer0dot, on v1 gas impact, is heavy for each new asset, for this reason, the addition of a new asset should be carefully considered in that regard, thanks for pointing it out.

Meanwhile, on V2 thanks to an upgraded architecture, token addition overall gas burden is minimal, allowing a more “aggressive” addition policy.

V2 deployment being an option in the near future, Community sentiment polls are here to identify “sentiment” to ease up the addition process. A greenlighted asset can be schedule for V1 or V2 after the polls batches.

For example, we can witness a strong community case and consensus for AAVE addition, so this asset might be considered for V1 addition, while another asset might also gather consensus but will match a more relaxed timeline and be considered for V2.

is it possible if this proposal comes onchain. that it can be activated in a faster period, compared to the 1st proposal?

I’m surprised to see so much positive sentiment for UNI. To me the token has far too much volatility and will likely be deposited/staked within the UNI platform itself in order to take advantage of their profit sharing.

Does it really make sense to deposit UNI on Aave?

1 Like

Hey @MarcZeller :wave:

Thank you for the proposal, I have 2 questions:

  • Could you expand on the fact that Aave has a different risk rating than UNI. Both Aave token + Lend migration to Aave just have recently launched. Weighing in smart contracts risk of recently deployed contracts and given that both don’t have admin functions (the token contracts) what are the main factors for the risk evaluation?
  • GUSD seems to be an exotic choice from a market cap perspective. Even though it seems low risk from its track record in terms of having no security incidents, I think it’s still relative due to the low amount of funds it holds. Could you further elaborate on what benefits adding this asset brings to users vs risks?

Should be possible to vote with StkAAVE yes.

1 Like

+1 bump - I think this makes more sense than choosing between either stake or collateral, one in the same?

Hey everyone, I and the Gemini team are really excited about the potential for GUSD to be added to the Aave Protocol. Thank you @MarcZeller for posting this Sentiment Poll and for fielding some questions on GUSD.

Thank you all for the thoughtful questions and discussion around GUSD. I am here to help answer any questions you might have. So please fire away!

Also, some good news yesterday. Gemini now supports the custody and trading of $AAVE across all of our platforms. https://twitter.com/tylerwinklevoss/status/1314226221169999872

Here’s to many more exciting days ahead! Onward and upwad!

8 Likes

Thanks for the clarification @MarcZeller, with that in mind, my opinion is FOR UNI and AAVE, but against GUSD. Even when V2 rolls out, with such a small user base, it wouldn’t make sense to implement even a slight increase in gas (i.e. decrease in UX) for another stablecoin that hasn’t received mass adoption, unless the value proposition is significantly greater than the coins we already support.

With that said, I appreciate Gemini’s participation and willingness to innovate. Perhaps I’ll be proven wrong! The market cap has already risen to just under 15 M$, who knows?

Thanks to @tylerwinklevoss for being open and participating in the discussion!

*Caveat: If the benefit of implementing GUSD in V2 would still outweigh the slight gas hit, we should totally implement it.

1 Like

With overwhelming sentiment how quickly can these things actually be rolled into governance AIP for vote ? We have been talking about AAVE as collateral, everyone seems to be on board, what are we waiting for ?

How does this process work and what can be expected for actual AIP voting from inception, to vote? Anyone know?

4 Likes