ARC : Propose an AAVE x CURVE Alliance

Abstract:

Aave and Curve are two of the main DeFi protocols in constant evolution and growth with synergies between. One way of increasing these synergies would be to give each protocol some voting power in the other governance.
A few weeks ago, i posted an ARC about a strategy using Curve to increase the revenues earned by Aave DAO. However, to benefit from the Curve system in the most efficient way, it requires to lock CRV.

Aave DAO is accumulating some CRV with the ecosystem collector, but not enough to boost the treasury from the ecosystem collector considering it’s now around 11.8M$ (or 753.3M$ including the ecosystem reserve). So how could the DAO get more CRV?

  • Buy CRV using part of the funds from the ecosystem collector, but this would require approximately 850k$ to get the maximum boost on the Curve pools.

  • Propose a token exchange between AAVE and CRV that increase the synergies created between both communities over the last year.

I would like to support the second option, especially because it would allow both communities to diversify their treasury without selling either Aave & Crv or spending additional stablecoins for this deal.

Treasury state:

AAVE:

  • Stablecoins: 1.3% of the DAO treasury worth 9.8M$
  • Ecosystem Reserve: 98.4% of the DAO treasury worth 741M$ in AAVE tokens
  • ETH/BTC & Governance tokens earned with the ecosystem collector including: 0.23% worth 2.05M$ (including CRV: 0.007% of the treasury worth 53K$)

CURVE:
Curve DAO also mostly hold $CRV with 123.9M tokens worth 191M$, there is probably other addresses with stablecoins & other tokens, but I couldn’t find it.

If Aave DAO propose to exchange 2M of CRV (currently worth 3.06M$) it would cost around 10710 $AAVE from the ecosystem reserve (0.41% of the ER) at the current rates.

Purpose:

Aave and Curve are two main protocols in Defi. Both communities have aligned interests to see this exchange approved:

• Collaborate on a shared vision through governance in each other’s communities: The token exchange makes Aave and Curve governance stakeholders in one another’s communities. Each community will have influence in the other’s governance process, enabling them to best represent their interests and to collaborate

• Develop synergistic features: This could help create new Aave pools on Curve for the other money markets and using Curve pools as a collateral on Aave while earning Curve rewards for example.

• Positive alliance: This exchange can increase the synergies, the TVL and the revenues for both protocols. If Aave can vote to get more CRV distributed to Aave pools through the gauges, it should raise the Aave pools APR and so, increase the capital deposited in the pool which increase Curve revenues. Adding AAVE to the Curve war would also increase the difficulty for other players to increase their gauges.

Benefits for AAVE:

  • Be a part of Curve governance (Vote on governance proposals, gauges vote to increase the CRV distribution on Aave current and future pools)
  • Increase Aave DAO revenues by using Curve to deposit the treasury on boosted pools
  • Earn trading fees in 3CRV tokens by locking CRV 4 years
  • Earn EPS & other airdrops for veCRV holders
  • Diversify the treasury

Benefits for CURVE:

  • Be a part of Aave governance (Vote on governance proposals, create AIPs)
  • Support of the “CRV lockening” by AAVE → Increase % of locked supply
  • Possibility to earn more AAVE (+BAL) by staking on the safety module
  • Opportunity to create a pool AAVE/StkAAVE or AAVE/sAAVE/StkAAVE
  • Use the AAVE tokens as a collateral
  • Diversify the treasury

What think the community about this?
Please share your opinions in the comments below & vote on snapshot (vote start a few hours after the post) : Snapshot

If Aave DAO support this proposal and think we should propose it to Curve DAO, I will post this on Curve forum to get a feedback from their community.

12 Likes

Hello @Dydymoon , very good idea. If this proposal goes through (and I hope it does), it would significantly improve the synergies between AAVE and Curve.

Personally I agree with the proposal to exchange tokens between AAVE and CRV rather than selling tokens from the ecosystem collector.

However, I have some remarks to make.
From the point of view of benefits, either from Curve’s or AAVE’s point of view, you say that this would allow each to take shares in the governance of the other. However, to take shares, other than owning tokens, you have to vote, during the proposals on Curve as well as during the AIPs on AAVE.

It would be necessary to lock the CRVs for veCRVs, but for how long? 4 years? (which would allow AAVE’s governance to have a maximum of voting power). Or less time?

How exactly would it work in a vote? Let’s take the example of a proposal made on Curve.
Would AAVE governance have to vote for each proposal made on Curve?
Would the governance have to vote only on the Curve proposals that concern it (in any way)?
If there are several proposals in a week on Curve, should we make a summary of the proposals in an AIP (or via a snapshot) on AAVE so that the multisig can then vote on Curve with the veCRVs?
If we do a recap of the proposals on Curve in an AIP or snapshot on AAVE, how often should we do it? Every week? Every 5 days?

Also, would it be possible to use a tool like PrimeDAO that would allow DAO2DAO interactions?

Apart from these few questions I find this idea very interesting. Can’t wait to see what other community members think about it.

6 Likes

Hey, thanks for the questions and good feedback !

In my example yes the CRV would be locked 4 years, as it allows to earn the best return possible on curve (lock 4 years is 1:1 CRV/veCRV vs 1:0.25 for lock 1 year) but the lock time can be voted

On the technical side, not sure how the votes could be handled, but my guess would be :

  • The Aave DAO doesn’t needs to vote on every Curve proposal, but only the one that would concern the protocol, and probably same for Curve.

  • I imagine that it would be quite complexe to make an AIP for every vote so Snapshot seems to be the fastest and correct way to get the community voice for a vote, so one snapshot vote / Curve proposal, before the governance vote with the address that hold veCRV
    (Maybe something can be dev to automatically post a proposal on snapshot as soon as a CIP is live & opposite too for an AIP). Maybe @Emilio can bring more details on this

  • If every vote is posted automatically, i’d say one recap every 1-2 weeks should be good

About PrimeDAO, they contacted me on twitter, i’m currently looking at their project and then i’ll talk to them about this DAO2DAO feature, however, i believe the project is still quite early.

Thanks again for your feedback !

4 Likes

I personally think this is an interesting idea and should be looked into.

Knowing that an adaptor for CRV-aware LP tokens and gauge boosting is in the works for the AMM market*, having CRV in the treasury to boost LP rewards could be strategically useful to attract more depositors by reducing the opportunity cost of being in the Aave AMM market instead of something like convex or yearn which also offer good returns on Curve LP tokens.

I also like the ability for the DAO to boost CRV rewards towards the aave pool in the weekly CRV gauge vote, as this could allow to increase the amount of deposits in Aave by further incentivizing Aave-based pools on Curve.

*Feat: Curve treasury by kartojal · Pull Request #170 · aave/protocol-v2 · GitHub

3 Likes

These two are interrelated. In order to ensure sufficient liquidity, I suggest we not lock all CRV for 4-yrs but rather lock it in tranches of various maturities. This would require different addresses as lock duration is pegged to each wallet, but seems like an easy obstacle to overcome.

Further, i fully support using the vote to boost aave based pools as this will lead to mutual benefits of liquidity (both on mainnet and where ever deployments overlap).

Furthermore, may want to partially consider cvxCRV / CVX in a manner similar to badger and frax. Long game being CVX opens up voting of their veCRV and CVX currently equating to more than 1 veCRV.

Hey ! Thanks for the feedback !

Not sure about using different addresses as it would cost a lot in fees to transfer the reserve factor on several addresses, considering most of the fees are received on V2 address.
Another point would be to reduce our amount of veCRV without locking 4 years.

I totally agree about considering to use part of the funds on Convex, however as the protocol is still a bit new, we should limitate the exposition. However, if we can exchange that much CRV, we could use some CRV on Convex as cvxCRV to accumulate CVX until we need to extend the Aave boost/voting power on Curve.

Convex opening votes for cvxCRV holders would be amazing, but not sure if they can really do it ?

1 Like

The snapshot vote is now closed with 99.33% in favor of this proposal (16.56K AAVE voted)
https://snapshot.org/#/aave.eth/proposal/QmUasF6yZRzQR7yzvjgTfrg7XREH3Do5EMqP4BBxJpqgu5

I will post the same proposal on Curve Snapshot next week to get their community opinion.

Thanks to every participant on the Aave vote !

5 Likes

re: CVX updates, including voting. no longer an if, but when. Also discusses other CVX partnerships, including alternatives we may consider here.

2 Likes