Hi all,
Having closely observed the recent discussions on the forum, X, and all across the space, we (Areta) wanted to step in and offer a potential path forward as a neutral, objective party that is not a service provider to the DAO. Before we do so, I’d like to re-introduce myself and Areta to the community to provide some context.
Background & Context
Areta is a leading investment banking and strategy firm focused on the digital assets space. We partner with teams on M&A/capital markets transactions and commercial strategy projects; for example, we recently sold a leading prop trading platform, Breakout, to Kraken, supported Bridgepoint Group on its majority acquisition of ht.digital (the first private equity buyout in crypto), and also worked with Uniswap Foundation to develop up and operate larger builder-focused projects. More relevant in this case might be the work we’ve been doing with Aztec Network over this year on entity restructuring and enabling operational excellence. We were able to get a birds-eye view into the roles of Labs and Foundation, how they could work together to ensure the success of the network, and at the same time, enable operational excellence, clear execution, and accountability to all stakeholders, be they investors, team members, or contributors.
We have a long history with Aave. I (Sid) first led the Aave delegation for LBS Blockchain Society from October 2022 to February 2024, having maintained >95% voting participation, establishing ourselves as the most viewed delegate platform on Aave, and being selected in the first cohort of the Orbit program itself. I then moved our delegation over to Areta in February 2024, and we’ve been delegates and have consistently participated in the DAO ever since. We’ve maintained very good relationships with all service providers and contributors on Aave, as I’m sure EzR3aL, Chainlink, LlamaRisk, Aave Labs, TokenLogic, and others can all attest to. We are a truly neutral party that is not a service provider, and have demonstrated this in our voting history.
Current Situation
Given our experience, the current situation to us stems primarily from a lack of organisational and role clarity across the DAO. To expand further:
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The DAO is not clear about the assets it owns or indeed, whether it is even able to own any assets without a legal wrapper or entity.
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The roles, responsibilities, and expectations of service providers to the DAO is not granularly defined today. There are a loose set of expectations; however, nothing formal has been defined and therefore can be enforced. The key drivers for good behaviour of service providers in a way that is “aligned” to the Aave DAO are reputational risk and affinity with the DAO, which, for an entity the size and paramount importance of Aave, are inadequate. There needs to be explicitly defined role clarity that is set in stone.
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There is a clear lack of definition in how revenue is distributed to the DAO and service providers, and even to tokenholders. While there are a set of expectations as to how revenue should be distributed, granular definition is absolutely necessary and would invariably make the community and token stronger.
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The method for counterparties to engage with Aave is not especially straightforward today. The options are to reach out to Aave Labs, ACI, or any other growth service provider, but the process for how decisions are made in regards to, for example, deploying Aave on another chain, is not well-defined. This is not fit for purpose in a world of increasing institutional engagement, where institutions require clear counterparties to engage with. This lack of definition also leads to bureaucracy, harming Aave’s competitiveness.
While these are the most glaring issues, there are several more operational and organisational challenges faced by Aave as a whole. All of these issues have led to tension between parties that are all, from the view of an impartial, involved observer, aiming to achieve the best for the Aave ecosystem. This tension has led to suboptimal outcomes in all manners - it has given competitors ammunition in BD discussions, brought uncertainty to long-term investors, and added a blocker in conversations with institutions who are invariably wary of engaging with a protocol “in strife”. Overall, this series of events is untenable and must be tackled professionally, bringing organisational and structural clarity befitting the scale, reputation, and primacy of the Aave ecosystem.
Path Forward
It’s admirable how the DAO and service providers have already started to formulate solutions to this issue. However, it is of utmost importance to take this process one step at a time, clearly define all of the issues, identify potential legal and operational routes forward (i.e., setting up an entity for the DAO, granularly setting out the roles of service providers and other contributors to the DAO, defining how revenue is distributed, etc.), reach consensus on each and every one of these aspects with key stakeholders in the DAO, and then execute.
It is critical to be deliberate and not act rashly at this point in time. This will only serve to expose the entire community to additional legal, operational, and even security risks, ensure even greater bureaucracy, and diminish Aave against its competitors. It is necessary to take time and not just move proposals to Snapshot immediately because this is not a simple issue and will take time to untangle and structure professionally.
In our view, these kinds of structured, stakeholder-heavy coordination efforts are best led by a neutral, independent party with no direct stake in the outcome.
Of course, this is what we at Areta do best and would be privileged to offer our support to the DAO. That said, the broader point is that an entity that can steer this process and key stakeholders in a professional manner while consistently reporting progress to the DAO is necessary to ensure that the outcome is one unified, operationally excellent Aave.