Aave - Treasury Report

[MatthewGraham]

Authors from Llama: @MatthewGraham, @Elliott and @MSilb7.

Llama is glad to present the very first Aave Treasury Report. A fresh Treasury report will be published here each month providing insight into performance of Aave. Live tracking data is available via the Dune Dashboard.

The Financial statements are set out per reserve showing the income generated from the start of 2021 along with expenses (not that there are many).

We have also presented a token flow statement. It should be noted that this combines all reserves, but for clarity we have split out each reserve into its own statement and provided a consolidation to show the total movement.

We are working to build out a balance sheet for our next iteration of this report and we welcome any feedback.

Aave_Financial_Report_August_2021.pdf (307.9 KB)

[MSilb7]

Hi everyone, building on Matt’s update, more info on the Dune dashboard can be found in this forum post: Launch Announcement: Aave Treasury Analytics Dashboard by Llama

You can bookmark this dashboard link for daily updates, it’s set to a view of the trailing 90 days: Dune Analytics

[Stan_3S]

Matt, thank you very much for sharing it. I wonder do you use any kind of policy or whitepaper? What is the treasury report basis on? Is there any kind of management policy or treasury management policy?

[Elliott]

Authors from Llama: @MatthewGraham, @Elliott and @MSilb7.

Aave - September Financial Results.pdf (3.0 MB)

Llama is excited to present our second iteration of the Aave Treasury Report. A fresh Treasury report will be published here each month providing insight into the performance of Aave, eagle eyed viewers will see this month some design changes too. Live tracking data is available via the Dune Dashboard .

The Financial statements are set out per reserve showing the income generated from the start of 2021 along with expenses.

We have also presented a token flow statement. It should be noted that this combines all reserves, but for clarity, we have split out each reserve into its own statement and provided a consolidation to show the total movement.

We are working to build out a balance sheet for next quarter. We welcome any feedback or insights you would like to see for next month.

[eboado]

Hi @Elliott, amazing job on the report.

Could you comment on how you calculate the “Revenue generated” on slide 3? Also, will you include Avalanche deployment too this upcoming month?

[JeremyKeating]

Bravo @Elliott, @MatthewGraham and @MSilb7
This is great work
Do you know if anyone looked at forecasting the key metrics into the future to come up with some kind of plan. Say for the next 12 months?

[fig]

@JeremyKeating this is a particularly interesting idea.

Financial reports, while important for telling stories of the past, give more color on the future health of the company or organization. I believe this standard could be applied to crypto.

Assuming discount rates and applying them to current cash flows could be an adequate way to model this. Take a DCF (discounted cash flow) as an example:

To accurately complete this calculation it would require years (or in this case) months of data.
DCF’s are a popular way to evaluate the future value of an investment.

Borrowing this idea from traditional finance, modeling would allow for more robust due diligence and investment decisions. $AAVE token holders would become more informed and set expectations for the core team and protocol. By doing so it would more closely tie the token valuation to the TVL, revenues, and health of the protocol. Establishing regular financial reporting would become a competitive advantage and would further Aave as a luminary in the industry.

An important integration would be to make sure all protocols are operating off of the same methods of financial reporting.This has been a challenge of crypto and is something regulators, accountants, and investors have yet to figure out. By doing so it would create a baseline which would allow for the comparison of different DeFi protocols.

Are we comfortable with advocating for Llama’s services adopted across other treasuries? What is the best cadence for reporting? Monthly? Quarterly? Or something different? By doing so is it encouraging the proliferation of algorithmic trading and bots for DeFi tokens?

If no - are we aware of any DAO’s or companies that are doing this internally? The answer may be yes and these records should remain public for users to see. This is the goal and epitome of decentralization; to provide more transparency and trust within the community.

These are the questions I consider in terms of next steps and need for the protocol. It will be interesting to see how the release of ARC will contribute to Aave’s revenue.

@MatthewGraham - to do so would it require more resources? If so, this may be a worthwhile grant from the protocol and we would support a proposal requesting additional funding.

Please keep us in the loop as you continue to provide more transparency and finance to major DeFi protocols. In blockchain, we believe success is communal and we remain excited for the future of Aave.

[JeremyKeating]

Hi @fig - good to get your perspective on this
tbh this goes beyond what I was thinking… in a good way
My first thought was to get an idea of what we have already committed to spending over the next say 12 months and what we expect to receive in revenue. I read on another post some concern about the speed of spending and it would be good to understand this. Just a sort of general getting a handle on expected future cashflows in and out.
But taking this further to what I would call a mid-term plan (say 5 yrs) is a great idea. Then also applying dcf to get an understanding of a valuation of the value of the protocol and token. This is a robust financial analysis and very helpful. Useful to do this with different risk rates to understand the potential outcomes
I think establishing regular financial forecasting of business cashflows would be as you say a competitive advantage.
It is something I do in my own profession so maybe the risk dao should look at this when we are up and running. It is a key indicator of future sustainability. Or perhaps it is something I can help with separately

[Elliott]

Authors from Llama: @MatthewGraham, @Elliott and @MSilb7.

Aave - October Financial Results.pdf (2.0 MB)

Llama is excited to present our third iteration of the Aave Treasury Report. A fresh Treasury report will be published here each month providing insight into the performance of Aave. Live tracking data is available via the Dune Dashboard .

The Financial statements are set out per reserve showing the income generated from the start of 2021 along with expenses.

We have also presented a token flow statement. It should be noted that this combines all reserves, but for clarity, we have split out each reserve into its own statement and provided a consolidation to show the total movement.

October has seen great performance with revenue growing month on month. Key takeaways are:

• Total treasury balance $753.82m
• Ethereum Network V1/V2 revenue up 24.8% from September to $5.16m
• Polygon Network revenue up 31.1% from September to $953k

Please do let me or one of the members at Llama know what you would like to see in the next iteration of this report.

[Elliott]

Authors from Llama: @MatthewGraham, @Elliott and @MSilb7.

Aave - November Financial Results.pdf (2.5 MB)

Llama is excited to present the November Aave Treasury Report. A fresh Treasury report will be published here each month providing insight into the performance of Aave. Live tracking data is available via the Dune Dashboard .

The Financial statements are set out per reserve showing the income generated from the start of 2021 along with expenses.

We have also presented a token flow statement. It should be noted that this combines all reserves, but for clarity, we have split out each reserve into its own statement and provided a consolidation to show the total movement.

November has seen a steady performance with revenue growing month on month in relation to the Polygon Network however the Ethereum network has seen a reduction in revenue by 40.3% from October highs. We think this is due to the washing through of the cream hack and general market conditions.

Key takeaways are:

• Total treasury balance $555.02m
• Ethereum Network V1/V2 revenue down 40.3% from October to $3.0m
• Polygon Network revenue up 17.1% from October to $1,097k

Please do let me or one of the members at Llama know what you would like to see in the next iteration of this report.

[eboado]

Good work as usual Llama team.
Is there any estimation on when the Avalanche network will be included into the report?

[Elliott]

Authors from Llama: @Elliott, @MatthewGraham, and @MSilb7.

December 21 - Treasury Report

Llama is pleased to present the December 21 Aave Treasury Report. A fresh Treasury report will be published here each month providing insight into the performance of Aave. Live tracking data is available via the Dune Dashboard .

The Financial statements are set out per reserve showing the income generated from the start of 2021 along with expenses.

We have also presented a token flow statement. It should be noted that this combines all reserves, but for clarity, we have split out each reserve into its own statement and provided a consolidation to show the total movement.

December has seen strong L2 performance with revenue growing month on month in relation to the Polygon Network, however, the Ethereum network has struggled to continually grow as alternative chains such as avalanche gain traction. Polygon and Avalance now have $10B TVL combined.

Key takeaways are:

• Total treasury balance $574.21m
• Ethereum Network V1/V2 revenue down 24.9% from November to $2.26m
• Polygon Network revenue up 16.6% from November to $1,125k
• Both the Ethereum and Polygon reserves are well-diversified with significant stable coin holdings across both networks >50%. See here for how we are considering deploying these assets to earn additional yield. ARC - Consolidate Aave V1, V2 & AMM Reserve Factors, Purchase CVX and Deploy to Earn Yield

We are working to integrate the Avalanche network into the reporting. Watch this space!!

Please do let me or one of the members at Llama know what you would like to see in the next iteration of this report.

[Elliott]

Authors from Llama: @Elliott, @MatthewGraham, and @MSilb7.

January 22 - Treasury Report

Llama is pleased to present the January 22 Aave Treasury Report. A fresh Treasury report will be published here each month providing insight into the performance of Aave. Live tracking data is available via the Dune Dashboard .

The Financial statements are set out per reserve showing the income generated from the start of 2021 along with expenses to date.

We have also presented a token flow statement. It should be noted that this combines all reserves, but for clarity, we have split out each reserve into its own statement and provided a consolidation to show the total movement.

The end of 2021 and throughout January has seen strong L2 performance with revenue growing month on month in relation to the Polygon Network and also avalanche markets, however, the Ethereum network as a result of rising competition has found it difficult to continue its growth seen early in 2021. Coupled with this January also saw significant downturns in the crypto market. This has ultimately had a significant impact on treasury holdings as a result of $AAVE token depreciation. Token price since the end of December has decreased by 38.2%.

Key takeaways are:

• Total treasury balance $337.30m
• Ethereum Network V1/V2 revenue down 12.1% from December to $2.1m
• Polygon Network revenue up 2.06% from December to $1.15m
• Both the Ethereum and Polygon reserves are well-diversified with significant stable coin holdings across both networks >50%.

We are working to bridge the gap we currently have with our reporting which is the exclusion of the Avalanche network. Dune does not currently support avalanche, however, we are working to build out an alternative way to track income and expense on this network.

Please do let me or one of the members at Llama know what you would like to see in the next iteration of this report.

[Elliott]

Hi, we are working to hopefully integrate this into the February/March Financial report. Which will include a retrospective look at the Avalanche network since the deployment of Aave on this network.

[Crypto]

Thanks for the report, Elliott.

If you could help us answer few questions, that would be helpful -

• What is the difference between Disbursements and expenses? As I cannot understand why disbursements are not included in the P&L.

• As per your December 2021 report, Aave disbursed in total $327m. Can you please break this down by general departments like sales and marketing, operational costs, IT development costs and IT support costs.

• Do we have an understanding of cash runway and other funding metrics for Ecosystem reserve?

• We would also like to know the decentralisation level of the protocol. For that we need to understand what amount of disbursements are processed by voting?

Look forward to your reply.

[Elliott]

Authors from Llama: @Elliott, @MatthewGraham, and @MSilb7.

February 22 - Treasury Report

Llama is pleased to present the February 22 Aave Treasury Report. A fresh Treasury report will be published here each month providing insight into the performance of Aave. Live tracking data is available via the Dune Dashboard .

The Financial statements are set out per reserve showing the income generated from the start of 2021 along with expenses to date.

We have also presented a token flow statement. It should be noted that this combines all reserves, but for clarity, we have split out each reserve into its own statement and provided a consolidation to show the total movement.

February has been a challenging month with poor market conditions, $Aave is no exception. We have seen a reduction in revenue across the two networks we are currently monitoring.

Key takeaways are:

• Total treasury balance $293.02m
• Ethereum Network V1/V2 revenue down 39.8% from January to $1.24m
• Polygon Network revenue down 54% from January to $527k
• Both the Ethereum and Polygon reserves are well-diversified with significant stable coin holdings across both networks >50%.

Please do let me or one of the members at Llama know what you would like to see in the next iteration of this report.

[capncook]

this report was super interesting to see what contributions the Polygon market made to AAVE DAO. @Elliott Thank you for this.

On other note - how are you planning to hedge AAVE price action risk ? As in this pic there’s lot of dependence on AAVE price - are you planning to hedge this via options or something?

[eboado]

I would actually like to comment on this aspect.
We should not forget that AAVE is factually governance power, and even if it is unavoidable to look at asset price sometimes as a reference, the analysis of the AAVE treasury of the system in terms of price is not so meaningful, just an extra reference.
All the distributions from that treasury have the objective of giving governance influence to parties chosen by the Aave governance, not profit.
The real Aave system treasury is the one composed of the income on the liquidity protocol.

[iceman]

I want to echo some of this thinking. AAVE treasury should consider some diversification efforts, as its’ treasury is basically all native tokens right now. I don’t know if there have been any formal proposals yet, but I’d be happy to work with the group on here to put together a comprehensive strategy to diversify a responsible amount of AAVE tokens into ETH and stable coins. It’s great that right now there are no real operating expenses offsetting the revenue so that even when revenue is down 54% it doesn’t have a negative impact… but this seems like a ticking time bomb for when more operational flows start going through the DAO’s P&L. I think we should get ahead of the curve, and start building a war chest for AAVE, reduce the VaR of the treasury.

[raho]

Llama community has been putting in a lot of excellent work on this. (See here)

cc: @MatthewGraham