ARC: Extend AAVE Liquidity Mining Rewards

Governance
30

Hello everyone, I have not been directly involved in discussions on this ARC until now for various reasons. However, I have been discussing the LM program extension a lot with various members of the community. So now is the time to take part in this discussion.

TokenBrice counter-proposal
Concerning snapshot votes:

  1. B - I would lean more towards the second annual plan with a 600k stkAave distribution. However, I think it is still a lot to squander 20% of the ecosystem reserv in 1 year. Many community members express their wish to be there for the long term, to be there for the protocol. However, from the messages I’ve read in the last few weeks, I have the impression that the goal of some people is to empty the ecosystem reserv as quickly as possible in order to get the maximum return in the short term. If we believe in AAVE in the long term, we must at least see it over 10 years, or even 15 years. Even if the ecosystem reserv diversifies as time goes by (see the latest alliance proposal between AAVE and Curve here). At the current rate of distribution, in 5 years the AAVE ecosystem reserv will be empty (I know that we can revote a modification of the LM in 1 year if the counter proposal of tokenbrice is approved). I think that a distribution of 400k stkAAVE per year (13,4% ER) will be already much more reasonable.

  2. A - This new reward calculation for the LM will avoid loan loops that bring nothing to the protocol except maximum rewards extraction for the users (I even took advantage of this technique for several weeks, it brings a lot of gains to the users but none to the protocol). If I saw this from a user’s point of view then I wouldn’t change it but I don’t think we are there for that.

  3. B - To my knowledge GUSD has not brought anything special to AAVE compared to Chainlink which is a long time partner of AAVE. I think it is better to allocate the 2.10% allocation to LINK and not share with GUSD.

  4. A - Many people are foregoing (direct) rewards from the SM to collateralize their AAVE, I think it would be interesting to reward them a little. 2.25% of the allocation seems correct to me.

Incentivize new assets or markets
I totally agree with this point. Setting aside 50% of the LM budget for new assets or markets seems to me essential.
However I don’t agree that an executive committee should have control over this. This should be included in the ARC for new assets or markets. At that point the community will decide whether or not to allocate it and if so how much.

Incentivize stkAAVE holding
I’m all for this idea. However I think this discussion doesn’t belong here and should have its own thread. So I won’t go into it here.

Security Module
I would like to comment on @pakim249 comments. You say that the security module should not be considered as a measure of the security of the protocol but as a measure of trust in the protocol. The SM was created (to my knowledge, and tell me if I’m wrong) as a security blanket for the protocol. AAVE stakers are rewarded for their risk taking (just like Unslashed, Nexus, etc.). But if they are not there to cover the protocol in case of loss but as a confidence measure, shouldn’t it be removed (with the rewards) and redirect the rewards to the LM. After all, those who trust the protocol first are the users, so we might as well reward them.

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