Hello guys, I noticed from recent reporting that AAVE has $50M in treasury assets, given the current market conditions, AAVE/ETH (-85% since All-time-high) and AAVE/USDC (-93% since All-time-high) are both at a 2-year low, do you think it would be wise to consider some AAVE token buyback?
Reasoning is simple: I believe AAVE token is grossly undervalued right now. Especially AAVE/ETH has been around this bottom level since beginning of 2022.
What do you guys think?
Buyback in tradiFi is usually the sign a project stops believing in its capacity to innovate and starts to pay back holders instead of reinvesting revenue in R&D and innovation.
A real sign of maturity is the capacity for a protocol to pick up its own bills and invest with its own revenue. this trend started last year with Aave with the funding of Aave Grants DAO, Gauntlet & BGDlabs. There’s still some weight that is currently supported by the Aave company but current revenue puts Aave every day a bit closer to being self-sustainable and generating a “profit” (it currently does, we should focus on making this situation the norm long-term).
Burning down the treasury in an attempt to “pump” the token might have an effect short-term but the cost is the future of Aave, That cost is way too high.
Furthermore, a DAO is an easy actor to front-run, so the only thing that will happen is the DAO buying the local top of the token
DeFi is still young, Aave is growing and innovating, now is not the time to turn into a boomer protocol, now is the time to invest and focus on protocol revenue and sustainability.
thus, I do not support this idea.
Agree with this a bit - but would also push back:
Buy-backs are usually when directors believe their equity is undervalued.
I don’t see the need right now - as Aave as an asset remains relatively correlated to the wider market. We have also seen it act as a high beta, performing to the upside when markets are greener.
I encourage the use of more active management of tokens and supply by other DAOs, but not by Aave.
I am a bit late to comment here it seems. I am strongly aligned with @MarcZeller and @fig. The business is still very early and there is a lot of growth ahead. With strong cash flow the business should be re-investing in itself to promote growth. The BGD, Aave Grants DAO and Gauntlet initiatives are great examples of how the DAO should be pursuing growth in my opinion.
Buying back equity now or even paying a dividend would be a signal the business lacks alternative investments for these funds. A company that pays a dividend to me signals it lacks the ability to invest this capital and earn a higher return on behalf of investors / token holders. More generally the DAO is in a place of rewarding those that help grow the ecosystem which involves distributing equity plus stables.
I think you are right in a way. Buyback is a bad idea but distribution should already have happened.
But as can be seen from the replies you’ve got, there is a layer of people on top who issue grants from the treasury to themselves, their projects or to people they know, or create new ventures with the treasury and get funding. This is the new crypto method of growing the protocol while not letting the riches flow to the actual stake holders who hold $AAVE. Essentially it’s like traditional stock companies showing a loss in order to grow and not pay out dividends.
Even if the protocol grows tenfold, the $AAVE price will not reflect the growth as the accumulated treasury is constantly diverted to the pockets of certain ‘‘builders’’ via grants or ‘‘initiatives’’. .
So you may be wondering why $AAVE price is low? It’s because it simply does nothing other than giving you a vote in governance. As long as the top layer of people hold on to a certain amount of AAVE or influence to sway vote, token holders will always get the short end of the stick.
and what would be the value and the TVL of an Aave protocol without V2 and then V3?
Would the protocol had more or less issues without the wave of independent security audits?
Would the last couple of months have created more or less bad debt without the risk DAO and updates to risk parameters?
What would have been the consequence of UST crash on Aave if the LTV was not 0%?
this “top” layer is just a bunch of people that contributed to lead aave to #1 position.
Be one of them instead of complaining.
If u wanna do nothing and get rewards, fund a government and raise taxes.
I believe AAVE will become better and better. I think the most important thing now is to keep the leading position in lending protocols. The funds in treasury should be used for the operation of AAVE now cause we do not know how long will this bear market be. In the next bull market, the price of AAVE will go up as long as it is the leading lending protocol.