Aave V3 Launch strategy: Code licensing

vote is up



I was very happy when I heard about the AAVE V3 launch. I was expecting something better from AAVE but when I came to know that it won’t be an open source I felt bad for it. AAVE is digging its own grave. Me as an AAVE user I want you to change that decision to change its OS for all and don’t kill the room for growth. As a developer I must point out that this could potentially lay off many innovative projects with not much funding and redirect them to other chains, none the less on an open-source IDO will be cheaper due to low gas fees. Just like me many more people are sharing the same opinion and losing their faith in AAVE.

1 Like

acutally not really. I’m happy with that and voted accordingly.

They say that knowlege increases with sharing …but this hasn’t got down well with aave…
The recent V3 version certainly is an improvement over the previous versions (for instance L2 specific features, cross chain facilitaion, allowing to extract highest borrowing from collateral etc…). But aal these features gets overshadowed by one drwaback i.e. V3 is licensed instead of open source.
Although ,licesnsed software provides improved security, practicality…but it hampers innovation…which is the very backbone of the crypto world.
open source provides a more diverse scope of design perspective that a single company could ever offer…

I am a student and I’ve been coding for few years now. For me, Open Source is very crucial for the growth of the tech and I’m unable to figure out why even at this time people are not helping others to grow. Every product over blockchain should be open source as it opens new paths for development. It is like going backwards to fascism. Licencing such good projects makes it limited to devs and not all devs can benefit from such a good tech and idea . The Aave as it was before should keep their code OS so people can develop and build new improvements in its code . IMO, it is a bad step and Aave team should think about changing it.

Lots of bad takes. Lots of wrong information flying around. People don’t even seem to be able to read this thread to catch up, thinking the decision is already made. And again the fascism comparison - which is truly ridiculous.

If you’d like the AAVE v3 to be Open Source - VOTE! The vote is still open. It’s gasless. It doesn’t cost you anything. It is literally in your hands. And as of now, it’s in favour of Open Source.


Edit: Getting the vibe that someone wants to Gish Gallop this thread with a few new accounts.


I personally believe that AAVE is a good project and it has many great features too. The new update makes it even better. They put in new features like highest borrowing from collateral and cross chain facilitation. These upgrades are amazing and very beneficial but one thing that they did will limit the growth of such a good project is that now developers need a licence for any changes or modifications that will limit the project growth not all Dev’s can afford a licence and the dev community wants it to remain open sourced. This is a really unhealthy strategy by team AAVE, this licensing fees will restrict the community growth.

You should take time and actually read what is being written by other posters. The vote is going on RIGHT NOW to determine this, open source is currently in the lead. It will not be a decision of the AAVE team but a decision made by the holders of the AAVE token, if you are a holder you can vote right now in the snapshot.


hey - the vote is still in progress, and it’s being decided by the token holders. And at the moment, the free option is winning. So if you want to see Aave V3 free, then you should just vote accordingly.

I agree with @neptune that seems to be a lot of misinformation around.
Nobody is advocating for having any type of license that limits any kind of integration or people building on top of Aave v3, at least from my perspective the question is we as community should establish certain protections for “malicious” forks or not.
I don’t really understand why this discussion is degenerating in black/white arguments, because the licensing topic doesn’t need to be like that. I would say the current vote on Snapshot is a bit misleading in those regards (if not read appropriately): Business License can be potentially quite close to full open source, it is a matter of how the license is made.
And let’s try to read properly the thread before starting arguments with no base, this is an important topic for our community.

The code licencing question is one that as a lot of dimensions, legally and otherwise.

Fair warning – this will be a big download and I wish I could reward everyone who reads this with an NFT with a fallout thumbs up and text that says ‘you made it through a Guard Post!’. I can perhaps lower the threshold to keep reading by saying that I’m a lawyer who specialises in non-corporate forms of governance, and that I used to teach this stuff at Oxford and have had a paper on this debated at Supreme Court level in the UK. And that I was kindly asked to come and give you guys some more angles to approach this question at.

TL;DR: I have no horse in this race, and am not completely full of shit (or if I am, then it’s at least the kind of shit it takes years to specialise in being full of)

Let’s first sharpen up the question a bit. What we’re really talking about here is whether the AAVE community should establish a legal right (enforceable against unknown third parties) in the code that represents V3 of the protocol. The degree to which this is done can be varied, and custom licences are not too difficult to draw up. That means there are plenty of intermediate solutions. The question is not “should we control the internet and all wear grey uniforms” vs “should we dance among the midsummer poppy fields naked”.

The topics this touches on could be usefully divided as:

    1. Legal exposure / opportunity
    1. Protocol strategy & coordination incentives
    1. Ethos, values & philosophical underpinnings of AAVE and DeFi

So let’s get cracking.

    1. Legalese

Let’s leave aside for now the question of how a DAO might best be organised in a way that optimises for tax, contracting, delegation, ability to hold assets and dissolution – that’s a whole other kettle of fish which I’m happy to talk about in some other context. As Neptune points out above, it is a relevant background question but it’s also quite a complex one. I’d maybe just point out that incorporation doesn’t have to be particularly cumbersome or expensive – I’ll have you a company 20 minutes from now if all you need is a corporate shell, but of course it’s a lot more complicated than that.

So if we limit ourselves to just the licence question, the situation is relatively straightforward legally.

Assuming that AAVE hasn’t itself breached any intellectual property rights in making V3, then really the only legal exposure here is that creating licenced access, or any other IP-gated system, can leave you open to being forced to sue others.

This is an aspect of property rights that almost nobody ever considers, but it can be a liability of sorts to have to keep suing people you know will attempt to breach your property rights. Of course, there are many ways to deal with this, including not taking enforcement action unless the issue is actually important, or keeping the actions on file as ‘swords to hang over others’ heads’ in case the forkers start to become harmful to the protocol or the space. Also, most ‘enforcement’ happens outside of court, in which case the relevant legal right is actually just negotiating leverage that can even help create partnerships.

So by and large, the legal exposure is pretty minimal and actually gives you more options. As a legal strategist I always encourage early plays that maximise for future freedom of action, especially when the game is at a stage where you don’t yet know what the individual goals and obstacles might be. On that strictly legal basis, I would encourage everyone to consider the option of a business licence. You don’t have to enforce it in every case, but you may want to keep the option.

TL;DR: Establishing legally enforceable rights gives you more options later down the line. Most enforcement doesn’t happen in court. Most importantly, having the rights in your pocket forces other parties to come to the negotiating table, and can lead to very fruitful partnerships. I’ve negotiated these kinds of deals myself – it works.

  1. Protocol Strategy & Coordination

A huge misconception about the law and legal rights is that their sole purpose is coercive. That’s part of it, but a big part is just coordination. If there were no law in the UK that says ‘everyone must drive on the left’, the roads would be pretty chaotic. How would you be able to trust, on Britain’s terrifyingly narrow and winding country roads, that the person coming the other way at 70mph isn’t going to be on your lane when you round the next corner? Everyone would need insurance, nobody could drive faster than 20mph because you need to be constantly vigilant about other cars, car manufacturers would need to build 97% crash proof cars, and the system would eventually settle at an equilibrium where driving is so inefficient and costly that almost nobody does it and the roads are empty (and safe) again. But then the highways wouldn’t be built, and everyone would just need to walk or ride a horse everywhere.

The point is this: Sometimes having a clear legal right that coordinates the multiple actors within a system (who don’t know or trust each other) creates useful activity, instead of discouraging it, because knowing what you can’t do can direct everyone’s efforts in the same direction.

The question for us is, what kind of licence would best coordinate the development efforts in the AAVE ecosystem?

Well, this is for each of you to decide on your own, but in my experience in the crypto space there have been real coordination problems with forks of successful projects coming out that dilute the adoption and hurt the brand of the original project.

Take OHM. The brand recognition is pretty spectacular, but the price keeps taking beatings because its special market niche is being crowded by all the OHM forks, so much so that people are being put off by the whole thing when these forks turn out to be ponzis. Same happened with liquidity farming – a lot of decent projects were just farmed to death, so a profitable cottage industry was formed of starting projects, abandoning them when they were being farmed to death and then starting new ones. Every time that happened, more holders left the system, and the rich insiders and intermediaries got richer. That is the opposite of what DeFi is supposed to be about.

So you might reasonably disagree with these pretty simple observations, but to me it seems like there is a considerable coordination problem in the DeFi space that is contributing to the DeFi bear we keep having to trudge through.

Would a different kind of licensing system align these interests? Probably not entirely, but at least it would be a start.

If there was a business licence (or some other third-party enforceable right), then of course bad actors could still fork the code (or, if not made publicly available, at least reverse engineer it). But they could never get proper funding for their projects because of the sword hanging over their heads of having breached IP rights (and the liability that comes with it), and their brand image would always have a dent.

Those facts alone might make them want to come to the negotiating table and work with AAVE, not against it. AAVE has a lot of goodwill that is worth protecting, and incentivising coordination is good for the DeFi space as a whole.

This brings us neatly to:

  1. The ethos & philosophy of AAVE and DeFi in general.

A lot of the arguments I’ve read above are versions of the idea that it’s just wrong to have anything other than open source for AAVE code, because it’s part of the whole point of decentralised finance. I’m not convinced that people always mean the same thing when they say that something is ‘decentralised’, but from the arguments above it looks to me that people mean something like this:

Open source code means anyone can bring their innovations and improvements to market without fear that some suit is going to show up at their house with a cease-and-desist letter, and the market is the only fair way to decide whose system is the best. Let individuals decide, not institutions.

Well, from someone who was born in that darkness, I say yes and no. Even leaving aside the fact that an efficient market does need market-creating fundamentals that are institutional (as a crude example: you can’t safely trade ETH if tradeable property rights in ETH are not recognised by some higher-level authority, like the Ethereum chain or a smart contract), there is still the thorny matter of how the relevant market in a given resource actually relates to 1. the availability of the resource and 2. Other market actors and their coordination or lack thereof.

Let’s take an example:

Blackacre, a large piece of woodland, sustains a growing population of deer. A few crafty hunters have spotted the opportunity and are trying to work out how best to coordinate their efforts.

In a pristine system with no hunters, the deer population will eventually level off as it reaches the limit of environmental sustainability, or enter a collapse & regain cycle with predictable or chaotic period depending on how fast the population grows. Basically, if the herd grows too fast, then it briefly overpopulates, uses up all the resources and collapses next year because of starvation. If you want to see this represented mathematically, google ‘logistic map’.

Efficient management of this population would be to bring the growth rate down to just enough that it will reach the peak carrying capacity of the land without collapsing due to temporary overpopulation, because that guarantees the maximum stable number of deer that can be hunted each year, and therefore the best access to food for the people living in the area.

If there are very few people living in the area, the most efficient way to ensure this level of hunting is reached is by giving everyone the right to hunt in Blackacre, but nobody the right to settle there and monopolise the resource. This is because if they monopolise it, they will hunt for their own needs and preserve the rest for a rainy day, which has the unwanted side effect that they won’t hunt enough in relation to the growth/carrying capacity and the population will start to collapse & regain. This then leads to years when there are very few deer to be hunted and people might starve or even die out completely as the deer population collapses before regaining. So why don’t they hunt for trade? Well, since there aren’t many people living in the area, efficient trade in hunted deer meat also won’t form because the trading network is too sparse for perishable goods. This is basically what has been found empirically in certain sparse native populations – their ‘property rights’ are consequently all about sharing access to hunting or foraging grounds and protection against monopolies. It’s all very interesting.

But if there are a lot of people living in the area, and everyone has the right to hunt in Blackacre, the deer population will be hunted to extinction. In that situation, it makes sense for someone to monopolise the hunting rights on Blackacre, make a profit on trading deer meat and let the market decide what the going deer meat price is before it makes sense to move on to other hunting grounds with fewer people. In this situation, the best way to ensure efficient distribution of available resources is to create a monopoly to preserve the value of the resource and manage it efficiently, but also to ensure that access to the management of that monopoly is fair and meritocratic.

This is a story that has been repeated throughout history, and our conceptions of property rights have always evolved in the relevant area. For example, there was a time in England in the early days of railroads where everyone could start their own railroad company. The problem was that the rails of different companies didn’t fit together, and if you had two competing railroad carriage companies using the same rails, they’d both go out of business because there weren’t enough people in the area to give enough income for both companies.

The point is that there are actually two metrics at play here that often get conflated when people wave the decentralisation flag:

  1. the regime that governs a certain resource (say, a licence for code); and

  2. access to the management of that governance system (say, a DAO).

The question of what regime should be chosen should, in my mind, just be a question of efficiency. Whatever system of resource governance can do the best job at aligning the interests of stakeholders is what should always be chosen, even if it means taking part in ‘legacy’ systems like intellectual property rights, corporate governance or whatever that might be distasteful to the freedom-loving folk of the Interwebs who haven’t yet read their Hayek properly. In this context, decentralisation is instrumental and not an end in itself – Bitcoin’s decentralisation is what has ensured that it hasn’t been shut down by a jealous government. So it scores highly on the instrumental decentralisation metric, and would continue to do so even if Michael Saylor turns into a fire-breathing dragon who sleeps inside a mountain on top of his enormous hoard of Bitcoin.

The question of how to ensure the best and fairest access to the management of that governance system is the real substantive question of decentralisation, and I see no threat to substantive decentralisation by choosing a different resource governance regime that might better align interests of various stakeholders.

So, finally – does a business licence or other limited access to the v3 code align interests better? I think so, but I’ll just offer these reasons which you’re more than welcome to disagree with:

    1. Forks, if done to extreme, can dilute brand and destroy the goodwill of the original project, because the entry-barrier to market is lowered too much. AAVE v3 buidlers won’t rug, because they have spent years of their lives building the system and it is clearly more valuable to them than short-term gains. But any old fraudster can fork open source code, slap on a different logo and try to get a short pump for exit liquidity, and they do.
    1. If a project is very successful, it will be forked a lot in a hot market where capital searches for parking spaces. We see this with things like OHM forks. Sure, the forks have an air of illegitimacy about them even without licence breaches to hang over their heads, but only once the original brand has been so diluted that the idea of an OHM fork becomes synonymous with Ponzi scheme. And by then it’s too late - once a DeFi investor sees an OHM fork as a Ponzi, it is not long before they see OHM as a Ponzi too. This is what brand dilution does, and it would be a colossal waste if this happens to AAVE. The stakes of inaction are never zero.
    1. This creates a perverse incentive not to make your protocol too good or effective as a parking spot for capital, because then it will be over-forked and diluted. A non-existent entry bar is not only bad for AAVE, but for the space. Projects will find defensibility by creating a less-than optimal protocol, and investors are put off by the constant frauds.
    1. So what you want is that the project is forked a bit, by the people who actually put the work in, and not by a ton by people who have no idea what they’re doing and are just trying to fleece users/holders. A licence is quite a good tool for that, because it raises the entry barrier a little but doesn’t make entry impossible. All you need, as so many above pointed out, is to contact AAVE and discuss your idea, and the community gets to decide whether a negotiated release of the licence can be granted, or purchased.

OK this is already much longer than I intended, and good on you if you made it through. I’ll get those NFTs minted. Discussion welcome.


Really appreciate the post @Guard , I think it should be mandatory to read for everybody involved in the discussion.
I would like to highlight this:

Even if potentially needed, and necessary to be prepared to organisational-wise, enforcement of IP should not be the only rationale for a business-oriented license. It’s something important even just to define some borders of what the Aave community is. I’m a firm believer that those borders need to exist, as I don’t think “dancing naked” all around represents more than naivety.

One natural question arising from your thoughtful explanation is, do you see an scenario where there is no legal incorporation of the Aave community? Maybe by establishing some type of special purpose vehicle exclusively in charge of matters related with the hypothetic license.

Like all good questions, it’s quite tricky. There are non-corporate forms of governance (or, shall we say, group enterprise) that work better in some functions than corporations do, and there are of course ways to layer the various legal structures in ways that create the kind of system the AAVE community wants - the only question is, what are the key features the community wants :smiley:

On the narrow question of how to hold the licence, an SPV is one option. Each tokenholder would get weighted shares in the company or some such arrangement, which puts the tokenholders in charge of the management of the licence - the problem with this is that it might count as a collective investment scheme, since the licence is an asset that has value. Another option is a trust where the AAVE company holds the licence as trustee for all the tokenholder beneficiaries. Trusts are extremely versatile group enterprise tools so the sky is the limit with what kinds of features we could bake into it.

Edit: But if the question is “should the AAVE community find some way to integrate into the legal system”, then my answer is yes - a DAO is already subject to the same laws as everyone else, and hasn’t been optimised for interactions with the legal system. The interactions it currently has are minimal, which sort of keeps it out of harm’s way and gives off the (naive) illusion that no optimisation is necessary. But trust me - it is easier to build houses before the winter comes than during.


AVVE V3 is resourceful and gives many important features to Defi protocol like cross-chain, I was very excited when I heard about this, the risk mitigation feature is interesting, but it’s should be open-source like previous versions, if the project will not be open-source it will kill any room for growth as a developer we want it to be open-source so we can bring more to AAVE and What if the protocol itself acquires the license…it can violate our governance rights

While we are believers of decentralization, and a free and open source community, our view on this is to protect the interest of Aave. We wish to allow Aave v3 grow and flourish further.

As such, we are supporting the business license as it prevents a fork of Aave v3 for the time being. We suggest a 2 to 3 years delay for it to transition to a MIT license and give time for Aave to build their ecosystem further.

We agree with one of the comments earlier that we do not want to see a brand dilution happening to Aave, and hope to seek support from other community members of voting in favour of the business license.

what is this free software bots assaulting the aave forum lol

1 Like

Thank you @Guard.)
for transparency can you disclose who contacted you to write post to promote business licence ?
those who asked made same effort to find someone promoting open source…?
dont trust, verify they say.))

no comment on one single vote (dEfImAxIMaLiStttttt) changing result last minute and no twitter post from @Emilio to communicate as he was a supporter of BL, so silent.

Can we have clarity on who going to own IP, what will be terms, how long before is OS ? how funny would be to have aave company owning licence because setting up dao is actually too much work and “business licence” is a made up licence with no prior existence… what a theater twist.))))

@lemiscate tweeted immediately after https://twitter.com/lemiscate/status/1470463353294360583?s=20.
I didnt check the vote for some time, sorry i dont look at snapshot 24/7.

The vote was fair, there were large voters voting for MIT as well. The details on how the business license will be handled are to be decided in this discussion.

imo a 1 year cooldown period before becoming free software is adequate. During the first year, the Aave governance should allow forking on a per proposal basis.

1 Like

just sad that Arthur and 3ac crew came again last minute like on harmony one vote without writing here
12 months good, good luck on everything

Now let us please all welcome… the conspiracy theories. Lot’s of words for this that are unfortunately inappropriate for the setting.

You apparently did not put the effort in to actually click the link to the source of the BSL 1.1. Here is an FAQ, that should break it down for you: Business Source License 1.1 | MariaDB

You apparently also didn’t understand or are unwilling to understand that Uniswap already used this same license (in this case, Uniswap Labs holds the license). The difference in the AAVE implementation will be, that the DAO will hold it, not Aave SAGL. Details need to be ironed out, which will take time, yet a “clarification” to what you’re asking is literally a few scrolls up for you to read. Ignorance, pure and simple.

Edit, because it’s annoying me: To the “single vote coming in, changing the outcome” nonsense… If you hold more AAVE, or any token of any project, you’re under higher risk and have a higher stake in the outcome of a vote. Thus you have exactly proportional power of your higher risk and higher stake to vote with. Not saying it’s a perfect system. But that is just the reality.